The Autumn Budget 2024
Chancellor Racheal Reeves has announced £40 billion in tax hikes, with businesses set to shoulder much of the burden. Key measures include increased National Insurance contributions and lowered payment thresholds, anticipated to generate £25 billion for the Treasury. Although the planned rise in Capital Gains Tax (CGT) is notable, UK rates remain the lowest among G7 countries.
While some business owners may welcome the freezing of fuel duty and a substantial increase in the Employment Allowance, many will see a steep increase in NIC charges. Below is a summary of the main updates
Employer National Insurance Changes
A central change in the budget is the hike in the employer National Insurance Contributions (NIC) rate on employee wages. Currently, employers pay NIC at 13.8% on wages exceeding £9,100. However, from April 2025, the NIC rate will rise by 1.2% to 15%, and the threshold at which NICs become payable will drop to £5,000. This threshold is to remain fixed until 2028, with annual increases for inflation planned thereafter.
To offset these costs, the Government is expanding the Employment Allowance. Currently, eligible businesses can claim £5,000 annually, provided their NIC bill from the previous tax year is under £100,000. The Chancellor announced a substantial rise in the Employment Allowance to £10,500 and removal of the £100,000 eligibility limit, making it available to all qualifying employers from April 2025. However, single-director companies without additional employees will not be eligible, making them vulnerable to higher NIC costs from April 2025.
Capital Gains Tax (CGT)
The CGT rate on residential property remains unchanged at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. However, other asset classes, such as shares, will see increased CGT rates, with the carried interest rate rising to 32% from April 2025. Additionally, the Chancellor announced a reduction in Business Asset Disposal Relief (BADR), reducing the CGT advantage on certain business assets.
Updated CGT Rates (Effective 30th October 2024):
Type of Asset Previous Rates New Rates Residential Property18% (Basic) / 24% (Higher) Unchanged Other Assets (e.g., shares)10% (Basic) / 20% (Higher)18% / 24% Carried Interest 28%32%
For BADR and Investors' Relief, the CGT rate will increase from 10% to 14% in April 2025, rising again to 18% in April 2026. Additionally, the lifetime allowance for Investors' Relief will decrease from £10 million to £1 million, aligning with the BADR limit.
Stamp Duty Land Tax (SDLT) – England
Effective 31st October 2024, the SDLT surcharge on additional dwellings in England will increase by 2% to 5%. Corporate buyers of properties over £500,000 will see their SDLT rate rise from 15% to 17%.
Inheritance Tax (IHT)
The IHT nil-rate band remains frozen at £325,000, with an additional residence band of £175,000 for direct descendants, providing a potential £1 million allowance for married couples. This freeze will extend until 2030. The Government also plans to tighten IHT reliefs, notably:
Agricultural and Business Property Reliefs: The 100% relief rate will apply only to the first £1 million of qualifying assets, dropping to 50% on any amount above this cap.
Unlisted Shares: Relief on AIM-listed shares and other unlisted shares will be reduced from 100% to 50%.
Starting in 2027, inherited pension pots will also be included in IHT calculations, marking a significant change in wealth transfer planning. Pensions were previously IHT-exempt, allowing wealth to pass tax-free to beneficiaries; this reform effectively curtails that benefit.
Additional Highlights
Income Tax & NIC Thresholds: Income tax and NIC thresholds remain frozen until 2028, after which they will adjust for inflation.
Business Rates: High-street businesses in the retail, hospitality, and leisure sectors will benefit from permanent reductions in business rates for properties valued under £500,000 from 2026/27.
Electric Vehicle Incentives: The 100% First Year Allowance for zero-emission vehicles is extended until March 2026 for corporation tax and April 2026 for income tax.
Non-Dom Reform: Changes to the non-domiciled tax regime will limit the ability of non-domiciled individuals to defer tax on overseas income, transitioning to a residence-based system in 2025.
VAT on Private Education: From January 2025, private schools will be subject to the standard 20% VAT rate, with exemptions for students with special needs funded by local authorities.