One of the most hotly anticipated Budgets in my career has now been and gone. With that came a significant amount of speculation, however, in fact, there weren’t a huge amount of changes announced from what we as a firm have been predicting, and that seems to have been echoed across the board with other indices (such as financial markets) not seeming to react in a volatile fashion (at the time of writing!)
In saying this, however, there were big public spending announcements and a Budget resulting in huge tax increases (one of the largest tax raising Budgets in history). It is obviously a clear alignment with a model of funding the State to provide better public services through tax take and public investment.
As expected, the speech itself was very politically charged given it was the new government’s first tax announcement and particular conflict around the state of the inherited position, and the level of transparency both parties has provided.
Much of the burden will be felt by employers given the headline (and priorly leaked) announcement of the employers’ NIC increase.
My brief, initial overview of the tax announcements is below, with our more detailed summary to come tomorrow:
Employers’ NIC Increase
Probably the headline announcement (that was the one real leak before the Budget announcement) was the increase of the rate of Employers’ NIC by 1.2% to 15% (from the current 13.8%), and a lowering of the secondary threshold (when employer’s start paying Employer’s NIC) to £5,000 (from £9,100).
However, the rumoured application of employers’ class 1 NIC to pension contributions wasn’t announced.
For small employers (those with employers’ class 1 NIC liabilities of less than £100k in the previous year), the ‘employment allowance’ will increase from £5,000 to £10,500.
National Living Wage Hike
The minimum wage for employees over the age of 21 will rise from £11.44 to £12.21 per hour on 6 April 2025. For employees aged between 18-20 years old, the increase will be from £8.60 to £10 per hour.
Income Tax bands and thresholds
It was announced that the current freeze until April 2028 announced by the previous government will continue, but the freeze will then end and then increase with inflation. This probably rather surprisingly.
Corporation Tax Roadmap
The government have produced a “Corporate Tax Roadmap” committing to:
- capping the headline rate of corporation tax at 25%;
- retaining the small profits rate and marginal relief thresholds;
- continuing the £1m capital allowances Annual Investment Allowance and “Full Expending”; and
- maintaining existing R&D reliefs (albeit the reliefs aren’t currently the issue, the issue is HMRC’s application of them).
We had expected this certainty around the corporation tax regime.
Capital Gains Tax Increase
The main rates will increase from 10% and 20% to 18% and 24% from today – meaning that the rates for disposals of all assets are the same (previously these rates only applied to non-residential property assets). I think this can be seen as being a lot more favourable than many, (including us) predicted.
Business Asset Disposal Relief (BADR) will continue with the exiting £1m lifetime limit, but the 10% rate will increase to 14% on 6 April 2025 and 18% on 6 April 2026 – dramatically reducing the already dramatically curtailed relief. This will likely prompt activity to benefit from the 10% rate before 6 April 2025.
The lifetime limit for the little used “investors’ relief’ will reduce from £10m to £1m from today, and the 10% rate will increase to 14% on 6 April 2025 and 18% on 6 April 2026 – in line with the BADR changes.
Business Rates
It was announced that 40% relief will be provided to “retail, hospitality and leisure” businesses on their business rates in 2025/26 up to a cap of £110,000. A commitment to permanently lower multipliers to “retail, hospitality and leisure” properties with a rateable value under £500k was announced from April 2026. Additionally, the small business multiplier was frozen for 2025/26. This welcome for many businesses in Cornwall.
These were stated in the overall context of a wider commitment to reform the business rates system over this Parliament.
Inheritance Tax & Pensions
As we had predicted, it was announced that inherited pension funds will be subject to inheritance tax from 6 April 2027. This will significantly change the inheritance tax mitigation planning of many that have previously relied heavily on this exemption. Accessing these funds should now be considered (in line with investment advice), with a view to carrying out lifetime planning with other assets.
There were no announced changes to the 25% lump sum or tax relief on contributions.
Inheritance tax Agricultural Property Relief and Business Property Relief
As we had predicted, changes were announced. A new total £1m cap on claims for both reliefs will apply from 6 April 2026 so that £1m of value will qualify for 100% relief, and any excess value will be subject to 50% relief. There are also anti-forestalling measures that ensure that these rules apply to gifts of such assets made on or after today (30 October 2024) – vindicating those that had engaged in pre-Budget planning in this regard (like many of our clients). This is sizeable for clients owning such assets.
This £1m cap will apply to trusts that may open the door to lifetime planning using trusts.
It was also announced that the rate of BPR available for ““not listed” on the markets of recognised stock exchanges, such as AIM” will reduce from 100% to 50% from 6 April 2026.
The current ability to pay inheritance tax over a maximum 10 year period in equal annual instalments does not appear to have changed, as we were expecting, to accommodate the restriction to these reliefs. Additionally, there does not appear to be any measures to enable profits to be extracted from limited companies tax efficiently to settle the liability.
A small ‘silver lining’ is the extension of APR to environmental land management from 6 April 2025 which is sensible given the wider landscape.
Stamp Duty Land Tax (SDLT)
The ‘additional property surcharge’ (being the current 3% additional rate applied to each rate for residential property acquisitions) will rise from 3% to 5% from tomorrow.
Furnished holiday let (FHL) regime abolition
This was confirmed to go ahead from April 2025, as expected. Those impacted should consider their position, as we have previously advised since this measure has been announced.
Electric Vehicles
The first-year capital allowance for zero-emission cars will continue until 2028, as will the current beneficial benefit-in-kind rate.
Fuel Duty freeze continues
This was once again frozen for the next year (I heard this was called the “cockroach of tax measures” as it keeps on surviving!) This presumably something to do with the debate over what measures impact “working people”, and maybe cynically the impact of powerful lobbying.
Venture capital schemes
The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and the Venture Capital Trust (VCT) scheme have been extended to 5 April 2035, as previously announced. This is great news for the start-up sector.
VAT on private school fees
The application of 20% VAT to private school fees will go ahead from 1 January 2025, as expected (albeit there was some reports of wavering on delaying implementation here given concerns over whether relevant schools and HMRC could be ready to implement this in time).
Payrolling benefits-in-kind
The previous announcement for this to be mandatory from 6 April 2026 was confirmed (spelling the end of the Form P11d compliance process).
Non-UK domicile regime abolition/changes
The previously announced changes to the non-UK domicile regime will take place from 6 April 2025 impacting income tax, capital gains tax and inheritance tax for those currently treated as non-UK domiciled, but with a couple of tweaks.
For an in-depth analysis of how the Autumn Budget 2024 could affect your tax planning, please stay tuned for our detailed review.