Autumn Budget 2024 – what are the key tax increases?
The most anticipated fiscal event in many years, the autumn budget 2024. Labour’s first for 15 years and one heavily discussed by the press since the party took power in July.
The result is a budget which has widely been described as a tax on British businesses, especially with regards to the announced 1.25% rise in employers NI and a slashing of the threshold down to £5,000.
Other key changes in the Autumn Budget 2024 include cuts to Business Property Relief and Agricultural Property Relief, which will significantly affect many clients. The changes to Capital Gains Tax and the changes bringing inherited pension pots and death benefits into the scope of inheritance tax will also significantly impact many clients.
How will the Autumn Budget 2024 affect you?
If you would like Alexander & Co to review your current situation or discuss how Budget 2024 could affect your plans, please contact us to discuss how we can assist you as a client. Additionally, if you require a more general tax planning review, please also contact us. We will be happy to discuss how we can provide this.
Business Property Relief and Agricultural Property Relief
Commencing April 2026, Business Property Relief alongside Agricultural Property Relief is being significantly restricted. The current rate of relief will continue at 100% for the first £1 million of combined business and agricultural assets on top of the existing nil-rate bands. The rate of relief will reduce to 50% after the first £1 million. AIM shares will be restricted to 50% relief on all their value.
To give an example, if a person passes holding shares in a trading company worth say £10m then currently there would no IHT. There would be £1.8m of IHT wen the new rules are applied.
We can provide advice on mitigation strategies to help combat this increase. Family businesses need to be considering succession planning early. If this applies to your circumstances, please contact us to discuss this with our tax team further.
Capital Gains Tax
The main rates of CGT applying at either 10% or 20% to assets other than residential property and carried interest will increase to 18% and 24% respectively. This applies to disposals on or after 30 October 2024. The rate for residential property remains at 18% and 24%.
The main rate of CGT which applies to trustees and personal representatives increases to 24% (from 20%). This is for disposals occurring on or after 30 October 2024.
The rate of CGT applying to Business Asset Disposal Relief (BADR) and Investors’ Relief is to increase to 14% for disposals made on or after 6 April 2025 and subsequently to 18% for disposals occurring on or after 6 April 2026.
Investors’ Relief lifetime limit is reduced from £10 million to £1 million (for Investors’ Relief qualifying disposals) made on or after 30 October 2024.
Carried interest Capital Gains Tax will increase to 32% before being replaced with an income-based system in future years.
Stamp Duty increases in the Autumn Budget 2024
The higher rates of SDLT for purchases of additional dwellings and purchases by companies increases to 5% (from 3%). This is in addition to the standard residential rates of SDLT.
The single rate of SDLT payable by companies and other non-natural persons purchasing dwellings that are not used for business purposes over £500,000 increases from 15% to 17%.
The above applies to transactions which have an effective date starting 31 October 2024.
The starting threshold for SDLT will revert down to £125,000 (from the current level of £250,000) from April 2025, which was already planned.
Annual Tax on Enveloped Developments (ATED)
The ATED annual charge is to rise by 1.7% from 01.04.2025 (in line with the September CPI). From 1 April 2025 annual ATED charges will be between £4,450 and £292,350, depending upon the property’s taxable value. This applies to residential properties held in companies not used for business purposes.
Employee ownership trusts
The rules on employee ownership trusts, which allow for a Capital Gains Tax free disposal of shares are being significantly tightened up. This will make them commercially riskier. Considering this, we recommend detailed advice is sought from ourselves for clients considering these arrangements.
Making Tax Digital
This is being introduced for landlords and sole traders with income more than £50,000 from April 2026 and for income more than £30,000 from April 2027.
Inheritance Tax announcements in the Autumn Budget 2024
Inheritance Tax is moving to a residence-based system, which is different to the current system. The full details of this are yet to be disclosed and we will report on this when this is known. This may provide some scope for UK domiciles who become non-resident to fall outside the scope of UK Inheritance Tax in certain circumstances.
Inheritance Tax thresholds are t be fixed at their current levels for yet another two years until April 2030.
Stating in April 2027, inherited pension pots and also death benefits will be subject to Inheritance Tax.
Amendments to transfer pricing SME exemption
The government is to consult on bringing medium sized businesses within the scope of the UK’s transfer pricing rules. This will be by reducing the existing thresholds of SME exemption. The government states it will maintain an exemption for small businesses. This may give rise to issues for businesses that carry shareholder debt.
The umbrella company market non-tax compliance
Legislation is to be introduced making agencies responsible for accounting for PAYE on payments made to workers supplied using umbrella companies. Subsequently, where no agency exists, this responsibility is to fall on the end client business. This will become effective from April 2026.
Late payment interest rates to HMRC on unpaid tax liabilities announced in Autumn Budget 2024
The HMRC late payment interest rate on unpaid tax liabilities is being increased by 1.5 percentage points, effective from 06.04.2025. Whilst interest rates may decrease slightly by April 2025, based on the current rate, this would mean a late interest charge of 9% as the rate will be set at base rate plus 4%.
Minimum wage
The National Living Wage is to increase from £11.44 to £12.21 an hour from April 2025. The increase (of 6.7%) equates to £1,400 a year for a full-time worker. Additionally, the National Minimum Wage for 18 to 20-year-olds is to rise from £8.60 to £10.00 an hour. This is an increase of just over 16%.
National Insurance contributions by employers
Employer National Insurance is to increase by 1.2 percentage points, to 15%, with effect from 6 April 2025.
As well as this, the Secondary Threshold, the level at which employers become liable to pay National Insurance on each employee’s salary will reduce. This will reduce from £9,100 to £5,000 per year.
The Employment Allowance will increase to £10,500 from £5,000 for small businesses. It will be extended to all eligible employers by removing the £100,000 cap. The government claims this will allow firms to employ up to four National Living Wage workers full time without paying employer National Insurance on their wages.
Pension taxation changes announced in Autumn Budget 2024
As mentioned above, from April 2027 inherited pensions and death benefits will also be subject to Inheritance Tax.
Childcare
The proposed changes to the High Income Benefit Charge, meaning that it would be based on household income and not where one person earns over £50,000, is being dropped. As a result, the current position will remain.
Fuel Duty
In a surprise move, fuel duty is to be frozen for another year. This extends the temporary five pence cut to March 2026.
Vehicle Excise Duty (VED) First Year Rates (FYRs) change from 2025/26. Rates for zero emission cars are to be frozen at £10 until 2029/30. However, rates for hybrid and petrol/diesel cars are to rise from 01.04.2025.
Double cab pick-up vehicles
Following a Court of Appeal decision, legislation is no longer be introduced to maintain the tax treatment of double cab pick-up vehicles. This applies for those with a payload of at least one tonne as goods vehicles.
Business rates
It was announced that a 40% relief for eligible retail, hospitality and leisure businesses will be available. This will be up to a cap of £110,000 per business. However, this is a reduction from the current relief available of 75%. From 2026-27 it is intended that permanently lower tax rates for retail, hospitality and leisure properties will be introduced.
This will be funded by the introduction of a higher multiplier for the most valuable properties. This will include distribution warehouses used by what the Chancellor deemed “online giants”. We understand the Rateable Value of such property to fall into this category is suggested to be £500,000.
Abolition of the non-dom tax regime confirmed in Autumn Budget 2024
As previously announced, a new residence-based regime will replace the current non-dom regime from April 2025.
As a result, offshore trusts will no longer be able to be used to shelter assets from Inheritance Tax. There will be transitional arrangements in place for people who have made plans based on current rules.
The planned 50% reduction for foreign income in the first year of the new regime will be removed.
Furnished Holiday Lets (FHL) tax regime confirmed to be abolished
Also previously announced, the government is to legislate to remove the specific tax treatment and separate reporting requirements for FHLs.
Income and gains from a Furnished holiday let will subsequently become part of a person’s UK or overseas property business. These changes are effective from 06.04.2025 for Income Tax and Capital Gains Tax. The changes will also apply from 01.04.2025 for Corporation Tax (and for Corporation Tax on chargeable gains).
VAT on private schools
Effective from January 2025, and previously announced, this was also confirmed in the Budget. Education services and vocational training provided by a private school located in the UK will become subject to 20% VAT.
Additionally, this also applies to boarding services which are provided by private schools. Advance fees paid from 29.07.2024 relating to terms starting January 2025 onwards will also be subject to VAT.
Summary of key allowances and reliefs from the Autumn Budget 2024
Key tax allowances and reliefs confirmed in the October Budget 2024 and previously announced which have now taken effect (from 30 October or 31 October 2024) include:
- The main rates of Capital Gains Tax have now increased to 18% and 24%. (Which is therefore in line with the rates for residential property).
- Investors’ Relief lifetime limit is being reduced from £10 million to £1 million. This is for Investors’ Relief qualifying disposals made on or after 30 October 2024.
- The higher rates of SDLT which applies to purchases of additional dwellings as well as purchases by companies is increasing. This is increasing to 5% (form 3%) in addition to the standard residential rates of SDLT
- The single rate of SDLT which is payable by companies and other non-natural persons who are purchasing dwellings with a value over £500,000 is increasing, This will increase to 17% (from 15%).
Those taking effect from April 2025 include:
- The National Living Wage is increasing for those aged 23 and over to £12.21 an hour. The National Minimum Wage for 18 to 20-year-olds will rise from £8.60 to £10.00 an hour
- The rate of employer National Insurance will increase by 1.2 percentage points to 15% from 6 April 2025
- The Secondary Threshold – the level at which employers become liable to pay National Insurance on each employee’s salary – will reduce from £9,100 to £5,000 per year
- The state pension is to increase to a new rate of £227.10 per week
- The rate of CGT that applies to BADR and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025.
Tax thresholds being frozen include:
- The CGT annual exemption will remain at £3,000
- The additional tax threshold of 45% remains at £125,000
- The rate of Diverted Profits Tax remains at 31%
- Tax relief on dividend income remains at £500
- Income Tax personal allowance at £12,570
- Higher rate threshold at £50,271
- Main National Insurance thresholds (the Class 1 primary threshold is £12,570 per year)
- Inheritance Tax threshold at £325,000.
Contact Alexander & Co to discuss the tax changes in the Autumn Budget 2024
The Budget announcements will have significant impact on many owner-managed businesses, especially with regards to succession planning.. Please contact us to discuss how these changes will subsequently impact you and how planning now may assist.
For further advice on any of the topics covered in this update, please do not hesitate to contact us to discuss our services for clients.
