Here are our top tax takeaways from the UK Autumn Budget 2024 delivered today by Chancellor Rachel Reeves.
1. Employer National Insurance Contributions (NICs) - Employer NICs will increase from 6 April 2025 from 13.8% to 15%, with the thresholds at which employers start paying NICs reducing from £9,100 to £5,000. The Employment Allowance for small business will increase from £5,000 to £10,500, and the current £100,000 threshold is removed.
2. Capital Gains Tax (CGT) rates - The lower rate of CGT will increase from 10% to 18%, and the higher rate from 20% to 24% with effect from 30 October 2024. The CGT rate for residential properties will stay the same at 18% (lower rate) and 24% (higher rate).
3. Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) - The rate of CGT on Business Asset Disposal Relief (BADR) and Investors' Relief (IR) qualifying assets will gradually increase to reflect the changes to the main CGT rates. From 6 April 2025, the rates on BADR and IR qualifying assets will increase from 10% to 14%. From 6 April 2026, both will increase further to 18% to match the new lower rate of CGT. The Government has also announced that the lifetime limit for IR will be reduced to £1 million (from £10 million) for qualifying disposals made on or after 30 October 2024.
4. Inheritance Tax (IHT) - The rules on 'basic' IHT remain unchanged. The nil rate band and residence nil rate band (RNRB) will remain frozen at £325,000 and £175,000 respectively until 5 April 2030. The RNRB will continue to taper for estates exceeding £2m. There is also a commitment to invest £52m to 'digitalise' IHT, presumably with a view to making reporting fully electronic, from 2027/28.
5. Subjecting pensions to IHT - From April 2027, the unused funds and death benefits held in UK registered pension schemes and Qualifying Non-UK Pensions Schemes (QNUPS) will be subject to inheritance tax upon the death of a scheme member. This change will apply to both defined benefit and defined contribution schemes, with the death rate of 40% applying above the proportion of the nil rate band allowance allocated to the pension funds.
6. IHT - Agricultural Property Relief and Business Property Relief - From April 2026, if assets currently qualify for 100% agricultural property relief (APR) or business property relief (BPR) from IHT, the first £1m of assets will still be tax free. The balance, however, will only benefit from half of the relief, meaning an effective tax rate of 20% on death. Shares that are listed on AIM will not benefit from the £1m threshold and the whole value will be taxed at 20%.
7. Abolition of the non-dom regime - From 6 April 2025, the existing regime will be replaced by a scheme which provides limited UK tax reliefs on foreign income and gains (FIGs). Taxpayers who would have benefited from the previous non-dom regime, but do not fit within the FIG regime, will be subject to UK tax on the same terms as an ordinary taxpayer. The concept of 'domicile' will be removed from the IHT regime, replaced by a residence-based system, with individuals’ estates subject to IHT if the deceased had been UK resident for 10 of the last 20 tax years. Offshore trusts established by non-doms will also be subject to consequential changes.
8. Income tax thresholds - From 2028/29, income tax thresholds will start to increase in line with inflation following the freeze announced by the previous Government. For Scottish taxpayers, the UK tax rates (incorporating the increased thresholds from 2028/29) will apply to non-savings and non-dividend income, with the Scottish thresholds and rates of income tax continuing to apply to other income (including earnings from employment, self-employment, pensions and property).
9. Stamp Duty Land Tax (SDLT) - The higher rates for additional dwellings (HRAD) for purchases of second homes, and purchases by companies (and other non-natural persons), is being increased to 5%. The "Super Rate" applicable to companies buying dwellings for more than £500,000 is raised to 17%. Both changes are applicable from midnight tonight. It will be interesting to see if the Scottish Government follows suit (though the Additional Dwelling Supplement (ADS) is already 6% in Scotland).
10. VAT on private school fees - The introduction of VAT on private school fees from 1 January 2025 is confirmed, despite many calls for its introduction to be delayed, with the legislation taking effect from Budget Day. The Government has published its response to the Technical Consultation launched earlier this year. Charitable rates relief for private schools will also to be removed from April 2025.
11. Carried Interest - From April 2025 to April 2026, qualifying carried interest payments will be subject to capital gains tax at 32%. After April 2026 carried interest payments will be subject to income tax and class 4 NICs as earnings, but with a modifier of 72.5%. i.e., for every £100 of qualifying carry paid, £72.50 will bear income tax. The government will consult on a number of technical rule changes for carry until January 2025. If it is classed as earnings, then carry earned by Scottish tax payers will be subject to the Scottish rates of income tax and paid to the account of the Scottish Government.
12. Energy Profits Levy - From 1 November 2024, the Energy Profits Levy on oil and gas profits will increase by 3% to 38%. The levy has also been extended to 31 March 2030. The Government also announced that the Investment Allowance will be abolished and the Decarbonisation Investment Allowance will be reduced to 66%.
13. Business Tax Roadmap - A roadmap has been published, aiming to give certainty to business. There is included confirmation that the rate of corporation tax will remain at 25% for this Parliament, together with the small profits rate and marginal relief remaining unchanged. The full expensing regime will be maintained along with the Annual Investment Allowance and R&D reliefs.
14. Interest rates on unpaid tax - Currently comparatively high on an historic basis, as they derive from UK base rate plus 2.5% - these rates will rise by a further 1.5% from 6 April 2025 to base rate plus 4%. Such interest is payable regardless of fault; and HMRC are very reluctant to remit the charge in any circumstances. Interest (and penalties) constitute a not insignificant source of overall receipts.
15. Business Rates - For 2025-26, eligible retail, hospitality and leisure properties in England will receive 40% relief on their business rates liability up to a cash cap of £110,000 per business. The small business multiplier will be frozen. A Discussion Paper has also been published, inviting industry to help co-design a fairer business rates system.
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