AUTUMN BUDGET 2024

A huge hike by any Budget’s standards, but one which Reeves labelled “responsible” in Labour’s mission to “rebuild public services” and “undo 14 years of damage.”

“Working people will not see higher taxes in their payslips”, Reeves said, as she confirmed no increases to employees’ National Insurance, VAT or income tax.

One of the biggest tax changes announced in the Budget was to Employers’ National Insurance contributions (NIC). These will increase by 1.2% to 15% from April 2025.

Less headline-grabbing but a further significant change to many businesses is the reduction in the secondary threshold for NIC. This will be reduced from £9,100 to £5,000 per annum from the same date, bringing more earnings into charge for Employers’ NIC. This could mean a further increase of £615 per employee, per annum, on top of the 1.2% rate increase.

The Chancellor says the changes will raise £25bn per year by the end of the forecast period.

Positives for some businesses, as the Chancellor announced an increase in the amount certain businesses can claim back from their NI bill under the Employment Allowance.

This will increase to £10,500 from £5,000. The Chancellor went on to say that this should mean 865,000 employers will not pay any NI next year.

National Minimum Wage is set to increase from April 2025, with a record rise for under-21s marking a significant step towards the goal of a single rate for all adults. The minimum wage for 18-20 year-olds will increase by 16.3% from £8.60 to £10, which equates to almost £2,750 per year for someone working full-time.

The National Living Wage will rise by 6.7% from £11.44 to £12.21 an hour from April 2025. For a full-time worker, this equates to an increase of over £1,500 a year.

The biggest jump in pay is for apprentices. Their pay will increase by a massive 18% from £6.40 to £7.55 an hour.

These wage increases, coupled with the changes to Employers’ NIC discussed above, will be a significant cost for many businesses.

Labour’s commitment to support EV adoption will keep incentives for EVs in company car tax through 2028, providing a clear advantage for employers offering green options in their fleets.

From April 2025, there’s also an increased tax difference planned between fully electric and other vehicles under Vehicle Excise Duty. By keeping these benefits for EVs, the aim is to make going green even more appealing, while also contributing around £400 million by the end of the forecast period.

The government has announced its plans to end ‘contrived’ Employee Car Ownership Schemes to prevent them being used to circumvent company car tax.

Changes have been announced to come into effect from 6 April 2026.

We await further details on any proposed legislation changes which are likely to impact ECOS in the future.

ECOS must be planned carefully to ensure compliance with existing tax legislation. Where the rules are not followed or the scheme has not been implemented correctly, HMRC could contend that the vehicles provided fall within the company car benefit in kind rules, creating a large tax and NI increase for the Employer and Employee.

We will issue further details when more information is published by the government.

The existing HMRC guidance allows the VAT rules for double cab vehicles to also apply for benefit in kind purposes. Therefore under the existing rules, a double cab pickup that has a payload of 1,000kg or more is accepted as a van for benefit in kind purposes, whereas a double cab pickup with a lighter payload is treated as a car.

This guidance will no longer apply to new arrangements for such vehicles with effect from 6 April 2025. From this date whether such vehicles are vans for benefit in kind purposes will depend on the correct application of the ‘primary suitability’ test. If the vehicle does not have a ‘clear predominant suitability for carrying goods’ then the vehicles will be treated as company cars for benefit in kind purposes. This is likely to impact the majority of double cab pick-up vehicles. Given the big difference in benefit in kind calculations this will result in higher costs for the employee and employer in providing such vehicles to employees.

Transitional arrangements are in place for employers who have purchased, leased or ordered double cab pick up vehicles pre 6 April 2025. However this is only until the earlier of the disposal or lease expiry or 5 April 2029.

Therefore Employers currently providing double cab pick-up vehicles to employees should plan ahead to ensure the cost implications are being considered.

The Chancellor announced significant investment in HMRC to improve tax compliance and debt collection.  

Key measures announced include boosting the numbers of HMRC compliance and debt management staff, modernising IT systems, and increasing interest rates on unpaid debt. There will also be a greater focus on umbrella companies that exploit workers and promotors of tax avoidance schemes. 

These measures are expected to generate an additional £6.5 billion in tax revenue over the next five years. 

As anticipated, the Government has published a Corporate Tax Roadmap, outlining several key commitments and plans for the corporate tax system for the duration of this parliament. The aim of this is to create a more stable and predictable environment in which businesses can plan with greater confidence in the long-term.

The main points outlined include the headline rate of corporate tax being capped at 25%, the small profits rate and marginal relief being maintained at their current rates, and a continuation of the full expensing capital allowances relief and Annual Investment Allowance.

Importantly for many businesses, the Government has also committed to maintaining the current rates for R&D tax relief claims and Patent Box.

The Government has announced a consultation on reforms to the UK’s transfer pricing rules – including the potential removal of UK-to-UK transfer pricing and a review of the exemption for medium-sized businesses.

From today, the lower rate of CGT will increase from 10% to 18%. The higher rate of CGT will increase from 20% to 24%. And the rates for sales of residential property remain unaltered at 18% and 24%.

BADR stays at 10% for 2024/25, then increases to 14% from 2025/26, and again to 18% from 2026/27.

BADR continues to apply to the first £1m of qualifying capital gains. 

The 14% difference between sales qualifying for BADR and the new main rate of CGT should be an incentive to crystallise capital gains before April 2025.

The ‘carried interest’ CGT rate is increasing to 32% from April 2025, with further reform from April 2026 to bring it into the charge to income tax. ‘Carried interest’ is a share of the profits generated by an investment fund, paid out to the fund’s investment managers.

The IHT nil rate band and residence nil rate band have been frozen for a further two years until 2030.

The first £325,000 of any estate can be inherited tax-free, £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.

Big changes announced in today’s Budget to two valuable IHT reliefs, APR and BPR.

Currently uncapped, from April 2026, the first £1m of combined qualifying assets will obtain 100% relief under APR and BPR.

For assets over £1m, the relief will be 50%, giving an effective rate of 20%.

Transitional provisions will apply the capped reliefs to gifts made from today’s date, if the donor dies after 6 April 2026.

Today’s Budget announcement brings some changes to the inheritance tax relief for AIM shares.

The previous relief has been partially abolished, meaning that only 50% relief will now apply, which effectively sets the tax rate at 20%.

This shift is part of a broader package of inheritance tax measures aimed at raising up to £2 billion.

From 6 April 2025, the domicile regime will be replaced with the new 4 year FIG (Foreign Income & Gains) regime, as expected. From 6 April 2025, all current non-doms who are resident in the UK and not eligible for the 4-year FIG regime will pay tax at the same rate as other UK resident individuals on any newly arising FIG.

Overseas Workday Relief (OWR) will be extended from three to four years, broadly in line with the FIG regime, and this relief is available even if those overseas attributable earnings are brought into the UK.

For CGT, current and past remittance basis users can rebase personally held foreign assets to 5 April 2017.

A Temporary Repatriation Facility (TRF) will be available to past users of the remittance basis, which allows them to pay tax on untaxed FIG arising before 6 April 2025 at a reduced rate of 12% for 2025/26 and 2026/27, and 15% for 2027/28.

IHT will move to a residence-based system. Broadly speaking, an individual will be subject to IHT on overseas assets when they have been resident for 10 out of the last 20 tax years.

The protection from tax on FIG arising within offshore settlor interested trusts will no longer be available for settlors who do not personally qualify for the 4 year FIG regime. An extension of the TRF will be available for UK resident settlors or individuals receiving benefits from an offshore trust.

For IHT purposes, excluded property status for offshore assets held in trust will only be available at times when the settlor is not a long term resident.

No changes to income tax relief on pension contributions and annual pension contribution allowances.

No change to the maximum tax free cash limit of £268,275.

However, unused pensions on death will be included in a person’s estate for inheritance tax from 6 April 2027. A consultation process will run from October 2024 to January 2025 on how to implement the changes.

No changes to the annual ISA limit of £20,000 per person per tax year.

And no resurrection of Jeremy Hunt’s ‘British ISA’ which he announced in the Spring 2024 Budget.

The surcharge on purchases of additional residential properties by individuals or by trusts and companies increases from 3% to 5% with effect from 31 October 2024.

Also, where a company purchases a residential property and the value exceeds £500,000 the SDLT increases from 15% to 17%, again with effect from 31 October 2024.

Where contracts are exchanged prior to 31 October 2024 but complete after that date, transitional rules may apply.

There will be no fuel duty increase next year. This means the 5p cut in fuel duty remains in place, preventing a potential 7p rise per litre at the pumps.

From January 2025, VAT will apply to private school fees, a move aimed at balancing contributions as 94% of children attend state schools. Previously announced changes apply to certain pre payments of fees made since the Summer for terms starting on or after 1 January 2025.

From April 2025, private schools will lose their business rates relief, as part of the government’s approach to make education funding fairer across the board.

Changes were announced to business rates to support businesses in the hospitality, retail and leisure sectors. The current 75% discount, set to end in April 2025, will be replaced by a 40% discount, capped at £110,000 for certain businesses.

This means that while businesses won’t face a fourfold increase, many will still see their rates nearly double under the new structure. The revised discount aims to ease the transition, though it will still mean higher rates for many businesses.

And finally… in a further boost for the hospitality sector, one of the biggest cheers of the day came when the Chancellor announced that prices at the pump will be slashed by 1.7% for draught sales, cutting a penny off a pint in the pub.