Explore the UK Autumn Budget 2024 and their implications for businesses and individuals.
The 2024 Autumn Budget, presented by the UK's first female Chancellor of the Exchequer, Rachel Reeves, has ushered in a series of transformative changes that will impact both businesses and individuals. With a focus on bridging fiscal gaps, the budget outlines several tax increases and reforms aimed at boosting government revenue while attempting to support economic growth. Here, we delve into the major highlights and what they mean for you.
Key Highlights of the UK Autumn Budget 2024
The Autumn Budget 2024 is characterised by a substantial increase in tax revenues, projected to raise £40 billion. A significant portion of this sum will be garnered from businesses, as the government seeks to rebalance the public finances. Among the most notable changes is the increase in employer National Insurance Contributions (NICs) and adjustments to Capital Gains Tax (CGT) rates, along with modifications to Inheritance Tax (IHT) reliefs and thresholds. These measures indicate a clear intent to redistribute the tax burden and address economic inequalities.
For businesses, the extension of Employment Allowance and the freezing of fuel duty offer some respite amidst rising National Insurance costs. Individuals will also see changes in CGT rates, particularly affecting those with investments or property sales. The reform of the 'Non doms' regime further signals a shift towards a more equitable taxation system for residents and non-residents alike.
Impact of National Insurance Adjustments on Employers
One of the most significant changes in the Autumn Budget is the increase in the rate of employer National Insurance Contributions. From April 2025, the NIC rate will rise by 1.2%, moving from 13.8% to 15%. This increase is accompanied by a reduction in the threshold at which employer NICs become payable, dropping from £9,100 to £5,000. These adjustments are expected to generate substantial revenue for the Treasury but pose a challenge for employers, particularly those with larger payrolls.
To offset this burden, the government has announced an enhancement to the Employment Allowance, increasing it from £5,000 to £10,500. The removal of the £100,000 eligibility threshold for this allowance will broaden its accessibility, benefiting more businesses. However, companies with a single director may not gain from this relief, facing potentially higher NIC charges. As employers strategise to manage these costs, understanding the nuanced implications of these changes will be crucial.
Changes to Capital Gains Tax: What You Need to Know
The Autumn Budget brings notable alterations to Capital Gains Tax, particularly affecting investment gains. While the CGT rates on residential property remain unchanged at 18% for basic rate taxpayers and 24% for higher rate taxpayers, other assets will see increased rates. From October 2024, gains from assets like shares will attract higher CGT rates, moving to 18% for basic rate taxpayers and 24% for higher rate taxpayers, aligning with the residential property tax rates.
Moreover, the widely-utilised Business Asset Disposal Relief (BADR) will see a reduction in its effectiveness. The CGT rate for BADR will increase from 10% to 14% in April 2025, with a further rise to 18% in April 2026. These changes necessitate a re-evaluation of investment strategies and the timing of asset disposals for individuals and business owners alike.
How Inheritance Tax Reforms Affect Estate Planning
Inheritance Tax reforms announced in the Autumn Budget 2024 bring significant implications for estate planning. While the nil rate band of £325,000 and the additional residence nil rate band of £175,000 remain unchanged, the government has extended the freeze on these thresholds until April 2030. This freeze effectively increases the tax burden on estates as asset values rise with inflation.
The budget also introduces restrictions on several key IHT reliefs. Agricultural and Business Property Reliefs will continue at 100% only for the first £1 million of assets, with a 50% rate applying thereafter. Additionally, unlisted shares will see a reduction in business property relief from 100% to 50%. These changes demand careful estate planning to mitigate potential tax liabilities and ensure efficient wealth transfer.
Business Rate Revisions and Their Effects
In a bid to support high street businesses, the Chancellor has announced a revision of business rates in England. The permanent reduction of business rates for the retail, hospitality, and leisure sectors is a notable shift, aiming to level the playing field with online competitors. Properties with a rateable value under £500,000 will benefit from this relief starting in the 2026/27 financial year.
Simultaneously, the introduction of a higher multiplier for properties with a rateable value over £500,000 seeks to balance this relief with increased revenue from larger premises. Until then, a temporary 40% relief will be available for eligible properties in 2025/26. Business owners must consider these adjustments in their financial planning to optimise their tax position.
VAT Implementation on Private School Fees
A significant change impacting the education sector is the introduction of Value Added Tax (VAT) on private school fees. From January 2025, education and boarding services provided by private schools will be subject to the standard VAT rate of 20%. This move aims to increase government revenue while addressing disparities in educational funding.
However, provisions are in place to protect pupils with special educational needs, ensuring that local authorities and devolved governments cover the additional VAT costs for these students. The removal of business rates charitable relief from private schools in England from April 2025 further underscores the government's commitment to revising tax policies related to private education.
Reforms to the 'Non doms' Tax Regime
The Autumn Budget 2024 continues the previous government's plans to reform the 'Non doms' tax regime, a move that targets the preferential tax treatment of UK residents with non-domiciled status. Under the current rules, non-doms can choose to be taxed on a remittance basis, paying UK tax only on income and gains brought into the UK.
From April 2025, this regime will be replaced by a residence-based system, offering relief on overseas income and gains only during the first four years of UK tax residence, provided the individual was not UK tax resident in the previous ten years. This reform aims to ensure a fairer taxation system while maintaining the UK's attractiveness to international talent.
Preparing for Future Tax Changes: Steps and Strategies
With the sweeping changes introduced in the Autumn Budget 2024, both businesses and individuals need to prepare strategically for the future. For businesses, reassessing payroll structures, exploring eligibility for the expanded Employment Allowance, and planning for business rate adjustments are critical steps. Individuals, particularly those with substantial investments or estate considerations, should revisit their financial planning strategies to adapt to the new CGT and IHT landscapes.
Seeking professional advice can provide clarity and help navigate the complexities of these changes. By staying informed and proactive, stakeholders can mitigate potential tax burdens and optimise their financial outcomes in the face of evolving legislation.
The UK Autumn Budget 2024 signals a transformative period in the country's fiscal landscape. With a focus on fairness and fiscal responsibility, these changes present both challenges and opportunities for those affected. Engaging with the details of these adjustments will be key to successfully navigating the new tax environment.
