Blog - 30/10/2024
Tax
Autumn Budget 2024 Summary
Chancellor Rachel Reeves delivered Labour’s first Budget in 14 years with the backdrop including promises of not ‘raising taxes on working people’, an inherited £22 billion black hole and public services requiring additional support. After months of uncertainty, the Budget announced tax rises of £40 billion, the largest since 1993.
The measures taken to fill the black hole include increases to CGT and employers’ National Insurance Contributions (NICs), as well as the abolishment of the non-domicile regime, an already confirmed but hotly debated topic.
The key tax headlines from the Budget are as follows:
Income Tax & National Insurance Thresholds
The current freeze announced by the previous Government will be maintained, however the freeze will not extend beyond 2028.
Class 1 National Insurance Contributions (NIC)
Employers’ NIC’s will increase by 1.2%, from 13.8% to 15%, from April 2025. The secondary threshold will also be reduced, from £9,100 to £5,000.
This will take effect from 6 April 2025 and until 5 April 2028.
The employment allowance will increase from £5,000 to £10,500.
Capital Gains Tax (CGT)
Tax | Previous Rates | New Rates | Date from which Rate will be Applicable |
Standard Rate (Basic rate taxpayers) | 10% | 18% | 30 October 2024 |
Basic Rate: Residential Property | 18% | 18% | 30 October 2024 |
Higher Rate (higher and additional rate taxpayers) | 20% | 24% | 30 October 2024 |
Higher Rate: Residential Property | 24% | 24% | 30 October 2024 |
Carried Interest | 28% | 32%* | 6 April 2025 |
*The carried interest taxation regime will be moved to the Income Tax Framework from 6 April 2026. BADR will be applicable at the current rate of 10% till 5 April 2025.
The lifetime limit for Business Asset Disposal Relief (BADR) remains at £1 million, whilst the relieved rates from BADR and Investors’ relief are set to increase to 14% from 6 April 2025 and to 18% from 6 April 2026.
Inheritance Tax (IHT)
The IHT nil-rate band and residence nil-rate band freeze has been extended a further two years until 5 April 2030.
The agricultural property and business property reliefs will be reformed from 6 April 2026 so that the current 100% rates of relief will continue to apply for the first £1 million of combined agricultural and business property, and the rate thereafter will be 50%, making the effective rate of IHT 20%.
Unused pension funds and death benefits from a pension will be brought into a person’s estate for IHT purposes from 6 April 2027.
Non-Domicile Regime
The changes to the non-domicile regime were widely discussed in the build up to the budget and the Chancellor has confirmed that the concept of domicile will be abolished, marking the end of the non-domicile regime. This will be replaced with a new residence-based scheme for individuals coming to the UK on a temporary basis.
We will be issuing a separate update shortly on these aspects.
Stamp Duty Land Tax (SDLT)
The SDLT additional surcharge for those purchasing additional homes has risen from 2% to 5%.
Investments
Relief for investments into qualifying Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) have been extended until 2035.
National Minimum Wage (NMW) & National Living Wage (NLW)
The NLW will increase for employees aged 21 and over from April 2025 from £11.44 to £12.21.
Increases to the NMW will also apply to those aged 18 to 20, increasing from £8.60 to £10.00m and 16-17, increasing from £6.40 to £7.55.
Private Schools
The VAT relief on private school fees will be brought to an end in January 2025 and business relief will be removed.
VAT at the standard rate of 20% will be applied to private school fees.
Duties
Tobacco taxes are set to rise by 2% above the retail price index and there will be a levy on vapes introduced in October 2025.
Taxes on alcohol will rise in line with RPI, however there is a 1.7% cut in draught duty.
The fuel duty freeze has been extended for another year.
Sean Bannister, Head of Tax, had the following comments following the budget:
“The Chancellor opened her Budget speech with a scathing criticism of the previous governments handling of public finances, with a particular focus on the lack of transparency that was offered to the Office of Budget Responsibility (OBR) and the purported economic blackhole that has been much discussed following Labour coming into power. Much of the early rhetoric was focused on a shift to stability and long term planning.
The key issues coming away from the today’s pronouncements for entrepreneurs are an increase in the general CGT rates and an increase in the effective rate of employer’s national insurance contributions. This will increase the costs of doing business and the economic rewards of risking capital to do it. In addition, the end of the zero rate for many assets subject to Business Relief for IHT (BR) will also be a cause for concern for many business owners looking to transfer business interests to the next generation. There were positives though, in the form of the retention of EIS and VCT reliefs and a continuing Business Asset Disposal Relief (BADR) regime that is only marginally less advantageous. Of course BADR is a much less valuable relief than Entrepreneurs Relief that preceded it.
A further attack on private schools was also announced with an abolition of their protected status for business rates from 6 April 2025, which will come as a blow following the introduction of VAT on fees announced earlier in the year.
The picture for non-doms, which has been a source of much speculation in the market for the last few months, broadly follows that which was announced in the policy document issued in late July. There does appear to be some positive news on the treatment of existing settlements, as ever the detail will be key here.”
David Goepel, Head of Private Client International commented:
“After much frenzied speculation in recent weeks that (amongst other things) this Budget might introduce radical changes to Inheritance Tax (IHT), in fact the basic framework of IHT appears to have stayed largely intact. In particular, there has been no change to the rule that a gift made 7 years or more before death is generally exempt from IHT – which will be a relief for many. Nevertheless, as expected, significant changes have been introduced to reduce the availability of Agricultural and Business Property relief from IHT, which will have a major impact for some clients.”
If you have any questions relating to the Autumn Budget and how these changes may impact you, please contact a member of the Tax Team.
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