Autumn Budget 2024, our summary

Changes to employment taxes

Increases to Capital Gains Tax (CGT)

Changes to Business Asset Disposal Relief (BADR)

Changes to Inheritance Tax (IHT)

Changes to Stamp Duty Land Tax (SDLT)

Corporate Tax Roadmap 2024

VAT on private school fees

Simplification and modernisation measures

Other announcements

As we begin to wrap up 2024, Chancellor Rachel Reeves's Autumn Budget has introduced several important changes that could impact small business owners, property investors, and families thinking about inheritance tax. From increases in National Insurance and Capital Gains Tax to adjustments in inheritance tax reliefs, these updates bring both challenges and opportunities.

Changes to employment taxes

Employers should prepare for notable increases in both national minimum wages and employer National Insurance Contributions (NICs) from April 2025. These changes aim to raise £20bn per year for the Exchequer and may represent one of the biggest cost increases for small businesses from a single budget.

• National minimum wage increase:

• Employer national insurance contributions increase:

• NI threshold decrease: The payroll threshold for National Insurance will also decrease from £9,100 to £5,000, impacting smaller payrolls.
• Employment allowance increase: To alleviate some of this impact, the Employment Allowance will increase to £10,500 per year for eligible employers, offsetting the NICs liability. 

Despite the increase in Employment Allowance, we anticipate employment costs will rise around 8.5% overall per annum, so we recommend reviewing how this will affect your business's payroll and budgeting.

Increases to Capital Gains Tax (CGT)

• Effective from 30 October 2024, CGT rates will increase for most assets (excluding residential property where the rates will remain unchanged):

Example:
Here is an example of how much you'll pay if you sell shares and make a profit of £10,000 over the tax-free allowance for basic rate and higher rate taxpayers*.

*It's also important to consider that the CGT rate depends on your total taxable income and the size of your gain. If your combined taxable income and gains push you into a higher tax bracket, the higher CGT rate may apply to the portion of the gain that falls above the basic rate threshold.

• CGT tax-free allowance: The CGT tax-free allowance remains at £3,000 for the upcoming tax year, meaning gains below this threshold remain exempt from CGT.

Changes to Business Asset Disposal Relief (BADR)

• BADR (previously Entrepreneurs' Relief): The rate of CGT applied to assets qualifying for BADR will be rising 10% to 14% on 6 April 2025 and further to 18% on 6 April 2026.

Example:
If you sell a business and realise a £100,000 gain

Changes to Inheritance Tax (IHT)

• The IHT tax-free threshold (£325,000) and the residence nil rate band (£175,000) remain unchanged and are frozen until 2030.
• Unused pension funds: From April 2027, any unused pension funds will count toward your estate for IHT, potentially incurring tax.
• Relief limit on agricultural and business properties: Starting 6 April 2026, only the first £1 million of agricultural or business properties will receive 100% IHT relief; values beyond that will receive 50% relief.

Example:
From 6 April 2026 a farm valued at £1.5 million, the first £1 million is fully exempt from IHT, and the remaining £500,000 will be taxed at 20%.

Tax planning is a complex area and tax treatment depends on personal circumstances, so we recommend if you need help in the area to seek a professional adviser.

• Alternative Investment Market (AIM) shares no longer 100% exempt: Business Property Relief (BPR) on AIM shares will be reduced from 100% to 50% commencing 6 April 2026 and will not be eligible for the £1 million tax free threshold. This change effectively sets the inheritance tax rate at 20% for these shares, as opposed to the previous 0%.

Changes to Stamp Duty Land Tax (SDLT) on additional properties

From 31 October 2024, the SDLT surcharge on additional properties will increase by 2%, bringing the rate from 3% to 5%. This also applies to non-UK residents purchasing additional properties. 
This measure is expected to increase transactions by 130,000 among first-time buyers and primary residence purchasers over the next five years.

Corporate Tax Roadmap 2024

The government released a Corporate Tax Roadmap with key elements to support business planning and investment the main commitments include:

• Corporation Tax rate capped at 25%
• Retention of the small profits rate and marginal relief at current rates and thresholds
• Full expensing, Structures and Buildings Allowance, and capital allowances for main rate and special rate plant and machinery
• Annual Investment Allowance (AIA) enhancements

These measures aim to stabilise the corporate tax landscape and encourage further capital investment.

VAT on private school fees

Starting 1 January 2025, VAT at the standard rate of 20% will apply to private school fees. This affects all payments for the January term made from 29 July 2024 onward. Parents should plan accordingly as this adjustment may impact tuition budgets for future terms.

Simplification and modernisation measures

In pursuit of a simpler tax system, the government introduced several changes:

• Unified online expense claim platform for employees: An online service is in development to streamline employee tax relief claims on work-related expenses.
• Mandatory payroll reporting for benefits in kind: From April 2026, employers will need to report income tax and Class 1A NICs on benefits in kind through payroll.
• National Insurance Credits for parents and carers: Legislation will allow parents and carers who missed Child Benefit claims to apply for NI Credits, protecting State Pension entitlements.

Other announcements

• Alcohol Duty freeze: A 6 month Alcohol Duty freeze to 1 August 2024 will take effect till February 2025.
• Fuel Duty freeze: The temporary 5p cut is extended until March 2025, with no inflationary increase for 2024/25.
• Vaping and tobacco duties: A new duty on vaping products will start on 1 October 2026, along with a one-off tobacco duty increase.

What next?

These tax changes will affect businesses and individuals in various ways, depending on your specific circumstances. We encourage you to reach out for tailored advice on how to prepare for these changes. As always, our team is here to support you in managing and planning for tax impacts effectively.