In the first Labour Budget since 2010, Chancellor Rachel Reeves delivered her Autumn 2024 Budget. The speech focused on details of the Government’s planned spending on public services, and the ways in which much needed revenue will be raised. What was clear was that the new Chancellor was keen to start to address some of the deficits which have to be plugged, announcing tax rises amounting to £40 billion. The key headlines centred on the rise in National Insurance for employers and the changes to Inheritance Tax, which will see inherited pensions counted as part of an estate, and combined business and agricultural assets worth more than £1 million – such as farms – subject to IHT.
Here’s an overview of some of the key announcements:
Immediate changes
- Capital Gains Tax (CGT) rates for disposals rises from 10% to 18% for basic rate taxpayers (20% to 24% for higher rate taxpayers); the higher rate for residential property remains 24%
- Lifetime limit for gains qualifying for Investors’ Relief is reduced from £10 million to £1 million
- Stamp Duty Land Tax surcharge for purchase of additional dwellings increases from 3% to 5%
- Rules tightened for close company loans to participators, transfers of UK pension funds abroad, Employee Ownership Trusts, Employment Benefit Trusts and liquidation of Limited Liability Partnerships to close loopholes
From January 2025
- Private school fees will be subject to VAT from 1 January 2025
From April 2025
- Employer National Insurance Contributions (ERNIC) will rise from 13.8% to 15%
- The Secondary Threshold will reduce from £9,100 to £5,000
- Employment Allowance for small businesses’ ERNIC will increase from £5,000 to £10,500 for 2025/26
- Some ‘double cab pickup vans’ to be treated as cars for some tax purposes
- Extension until March 2026 of the 100% first year allowance for qualifying expenditure on zero-emission cars and charging points for electric vehicles
- Abolition of the remittance basis of taxation for foreign domiciled individuals, to be replaced by a ‘residence-based scheme’
- CGT rate on disposals qualifying for Business Asset Disposal Relief increases from 10% to 14%
- CGT rate on ‘carried interest’ increased to 32%
- IHT Agricultural Property Relief to be extended to land managed under an environmental agreement with government or other approved bodies
- 40% business rates relief for retail, hospitality and leisure businesses for 2025-26 on values up to £110,000
- Charitable business rates relief no longer available for private schools
- Fuel duty remains frozen, and the temporary 5p cut announced in March 2024 will be extended to 22 March 2026
- Rate of interest on late paid tax will increase by 1.5%
- Security for certain tax reclaims increased by introduction of a requirement for a digital signature
- Above inflation increases in National Living Wage and State pension
- The tax treatment of Furnished Holiday Lettings will no longer apply in 2025/26
From April 2026
- CGT rate on disposals qualifying for Business Asset Disposal Relief increased from 14% to 18%
- ‘Carried interest’ moved to the income tax regime, with a discount for certain qualifying disposals
- IHT Agricultural Property Relief and Business Property Relief at 100% will only apply to the first £1 million of combined value; above that limit, the maximum relief will be 50%
- IHT Business Property Relief restricted to 50% for all ‘unlisted’ shares which are quoted on recognised stock exchanges such as the Alternative Investment Market
- Tightening of rules on charitable tax reliefs and closure of an avoidance scheme involving company cars from 6 April 2026
- Confirmation of the introduction of Making Tax Digital for Income Tax Self-Assessment from April 2026
Future changes
- Unused pension funds and death benefits payable from a pension will be included in a person’s death estate for IHT purposes from 6 April 2027
- Frozen personal income tax allowances and rate bands will end in 2027/28: inflationary increases will be reintroduced for 2028/29
- Company car tax rates announced for 2028/29 and 2029/30
- Incentives for purchasing electric vehicles will be maintained
What did the Chancellor leave unchanged?
- Income tax rates and National Insurance paid by employees, and VAT, frozen
- No changes to the ability to draw tax-free lump sums from pension funds, or reintroduction of a lifetime allowance
- Corporation tax rates fixed
- Inheritance tax nil rate bands frozen until April 2030 (extended by two years)
- No change to the additional Residence Nil Rate Band
- ISA and Junior ISA investment limits fixed at current levels until April 2030
- Previous Government’s proposal to base High Income Child Benefit Charge on combined household income will not be taken forward – payments will remain based only on the income of the higher earner of a couple
To discuss the impact of the Autumn 2024 Budget on your business please get in touch.