The Autumn Budget 30th October 2024

The Autumn Budget delivered by Chancellor Rachel Reeves, marks Labour’s return to fiscal policy-making after more than a decade.  Here’s a detailed look at the major changes introduced, particularly impacting individuals and businesses.

Key Tax Announcements and Changes for Individuals

Capital Gains Tax (CGT):

• Effective 30th October 2024, the lower CGT rate has increased from 10% to 18%, with the higher rate rising from 20% to 24%.

• Changes are also being made to business asset gains: the CGT rate for assets qualifying under Business Asset Disposal Relief (BADR) (formerly known as Entrepreneur’s Relief) and Investors’ Relief will rise to 14% in April 2025 and to 18% in April 2026.

• The lifetime limit for Investors’ Relief will also be cut from £10 million to £1 million for qualifying disposals on or after 30 October 2024.

• Carried interest tax rates will increase to 32% by 2025, with carried interest further moved into income tax from April 2026.

• No changes will be made to the rates of CGT that apply to residential property gains.

 Stamp Duty Land Tax (SDLT)

• The Stamp Duty Land Tax surcharge on second homes rises from 3% to 5% immediately.

• From 31st March 2025 the band between £125,000.00 and up to £250,000.00 will be re-introduced with SDLT at 2%.

• From 31st March 2025 first time buyers:
  
  - purchasing a home over £300,000 will have to pay SDLT, while the current threshold for payment is £425,000.
  
  - purchasing a home over £500,000 will no longer benefit from any first-time buyer’s relief. This threshold is currently £625,000.

Inheritance Tax (IHT):

• The nil-rate band and residence nil-rate band thresholds are now frozen until April 2030.  The nil-rate band will continue to be £325,000. Residence nil-rate band will continue at £175,000.  Residence nil-rate band will continue to start to taper at £2 million.

• Qualifying estates can still transfer up to £500,000 without incurring IHT, while the estate of a surviving spouse or civil partner can transfer up to £1 million without a tax liability.

• From April 2027, unused pension funds and death benefits from a pension will be included in the estate for IHT.

• Agricultural Property Relief and Business Property Relief adjustments have been introduced, with 100% relief for the first £1 million of combined agricultural and business property and 50% on values exceeding this amount, and in all circumstances for shares not listed on recognised stock exchanges.  This is set to start from April 2026.

 Income Tax

• Rates of Income Tax remain unchanged; however, the freezing of these tax thresholds will mean that increases in earning to compensate for inflation will create fiscal drag, potentially moving individuals into higher rates of tax. In acknowledgement of this, the Chancellor will review the Income Tax thresholds in April 2028.

• The remittance basis of taxation for non-domiciled individuals will end on 6 April 2025, shifting to a residence-based system for the first four years of residence.

• Notably, an increase of 1.5% in the interest rate on unpaid tax will apply starting in April 2025.

• Making Tax Digital for Income Tax (MTD ITSA) will be extended to sole traders and landlords with income over £50,000 by April 2026 and by April 2027 for those with income over £30,000

 Treatment of double cab pick-up vehicles (DCPU)

• Following a Court of Appeal decision, the government will not introduce legislation to maintain the treatment of double cab pick-up vehicles with a payload of one tonne or more as goods vehicles.

• From 1 April 2025 for Corporation Tax, and 6 April 2025 for Income Tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind and some deductions from business profits.

• The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

• It is not yet clear whether DCPUs will remain as commercial vehicles for VAT purposes.

 National Minimum Wage and Carer’s Allowance

• The National Minimum Wage will increase by 6.7%, moving from £11.44 to £12.21 per hour starting from April 2025.

• Additionally, the National Minimum Wage rate for 18- 20 year olds will increase to £10 per hour.

• The Carer’s allowance will increase from £81.90 per week to the equivalent of 16 hours at the National Living Wage, giving eligible carers over £10,000 annually.

 Employers’ National Insurance Contributions

• The anticipated increase in Employers’ National Insurance Contributions (also known as secondary contributions) has been confirmed. From 6 April 2025 to 5 April 2028, the threshold for these contributions will drop from £9,100 to £5,000, with future adjustments tied to the Consumer Price Index.

• In addition, from 6 April 2025 the primary rate for Employers’ National Insurance (Class 1) will rise by 1.2%, moving from 13.8% to 15%. This increase also applies to Class 1A contributions (covering benefits in kind) and Class 1B contributions.

• To support smaller businesses, the government will also more than double the Employment Allowance from £5,000 to £10,500 starting in April 2025. This adjustment will remove the previous restriction that limited eligibility to employers with a secondary Class 1 National Insurance liability under £100,000 in the prior tax year. As a result, qualifying employers will be able to reduce their Employer’s National Insurance obligations by up to £10,500 annually.

 Corporation Tax and Investment Allowances:

•  The headline corporation tax rate remains capped at 25% for this Parliament. Additionally, the government will maintain the full expensing regime and the £1 million annual investment allowance to encourage business growth.

• Enhanced tax credits for film and high-end television production now include a 39% rate for UK-based visual effects costs, promoting the UK as a leading audio-visual destination.

 Anti-Avoidance Measures and Business Rate Changes:

•  Targeted anti-avoidance measures have been introduced, affecting Employee Ownership Trusts and Employee Benefit Trusts effective from 30 October 2024.

• The 40% business rates relief for eligible retail, hospitality, and leisure businesses will continue but at a reduced cap, assisting businesses in these industries without a complete return to higher rates.

  Abolishment of Non-Dom Tax Regime: 

• The non-dom tax regime will be abolished from April 2025, replaced by a residence-based scheme, anticipated to raise £12.7 billion over five years.

 Additional Policy Highlights

•  Energy Profits Levy (EPL): The EPL charged on oil and gas producers is up to 38% as of November 2024, with the previous 29% investment allowance removed, extending until March 2030.

• Air passenger duty will see an increase, with higher surcharges for larger private jets.

• Electric Vehicle Incentives: Incentives for electric company cars and the 100% first-year allowances for zero-emission cars will be extended.

• VAT will apply to private education fees starting in January 2025.

• The tobacco duty escalator will increase in line with RPI, including higher duties on vaping products.

• Fuel duty has been frozen and the existing 5p cut will remain in place for another year.

Contact us for further support

Please contact us if you have any queries relating to the Autumn Budget.  Our expert team of accountants are on hand to assist you with your accounting, tax optimisation and compliance requirements. 

T: 01306 886681

E: info@ellisatkins.co.uk