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Autumn Budget 2024

A Budget fit for Halloween

On 30 October 2024, the country’s first ever female Chancellor delivered Labour’s first Budget since 2010. We were primed to expect tricks rather than treats and that is what Rachel Reeves delivered.

The Chancellor started her speech by reiterating her discovery of a £22 billion black hole in the public finances, and revealed that she would be announcing £40 billion of tax raises. Thus the mood was set for some hair-raising policy changes.

Read on for our summary of the frightening measures announced.

Employer National Insurance

The Chancellor claimed to be honouring Labour’s election promise to working people by not increasing income tax, Employee National Insurance or VAT. However, Employer National Insurance will increase from 13.8% to 15% from 6 April 2025. In addition, the threshold at which National Insurance is paid by Employers will reduce from £9,100 to £5,000 at the same time.

Many consider that such a rise is a tax on working people, with businesses needing to offset the increases by reducing future pay rises. However, the Chancellor will increase the Employment Allowance from £5,000 to £10,500 from 6 April 2025, which will help some smaller businesses.

Capital Gains Tax (CGT)

As widely predicted, CGT rates have increased, although not to the level of income tax rates, which will be a relief for many.

The main CGT rates will increase to equal the rates which already applied to residential property, with the higher rate increasing from 20% to 24% and the basic rate increasing from 10% to 18%. These changes take effect from 30 October 2024.

Business Asset Disposal Relief (previously Entrepreneurs’ Relief) continues to have a lifetime limit of £1m. However, the rate applicable to qualifying gains will increase from the current 10% to 14% in 2025/26 and 18% in 2026/27, making this relief much less valuable.

Inheritance Tax (IHT)

As widely predicted, unused pension funds and death benefits will cease to be exempt from IHT from 6 April 2027. Maybe the cruise ship companies will see a boost in bookings as people decide that they may as well start spending their pensions!

The freeze on IHT allowances has been extended to 2030, with each individual having a £325,000 nil-rate band, potentially raising to £500,000 if the residential nil-rate band applies.

The rules applying to potentially exempt transfers have not changed, which is welcome news.

Perhaps the biggest IHT bombshell is the restriction to Business Property Relief (BPR) and Agricultural Property Relief (APR). Both currently have no monetary limit and can exempt qualifying assets completely from IHT. From April 2026, the BPR and APR exemption on an individual’s estate will be restricted to £1m, with 50% relief applying to qualifying assets above that amount, i.e. an effective IHT rate of 20% above £1m.

The relief applying to shares listed on the Alternative Investment Market (AIM) will also be restricted to 50%, i.e. an effective IHT rate of 20%.

Personal taxes

In an unexpected move, the freeze on income tax and National Insurance thresholds will end in 2028, when they will once again increase in line with inflation.

It is also welcome news that tax relief for personal pension contributions has not been changed.

Corporation Tax

Corporation tax emerged unscathed from today’s scary announcements, with the rate staying the same and no changes to full expensing, the annual investment allowance or research and development tax credits.

Changes to the taxation of non-UK domiciled individuals

Despite widespread speculation around a softening in approach, it has been confirmed that the remittance basis of taxation for non-UK domiciled individuals will be abolished from 6 April 2025, to be replaced by a residence-based regime.

Individuals who opt-in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.

Also from 6 April 2025, a new residence-based system will be introduced for IHT, ending the use of offshore trusts to shelter assets from IHT.

The previously announced Temporary Repatriation Facility will be extended to 3 years.

Stamp Duty Land Tax (SDLT)

From 31 October 2024, the Higher Rates for Additional Dwellings surcharge on SDLT will be increased from 3% to 5%, and the rate payable by corporate bodies on the purchase of dwellings costing more than £500,000 will increase from 15% to 17%.