2024 Autumn Budget - Headline Announcements

Chancellor unveils biggest tax-raising budget since 2010

Rachel Reeves vowed to ‘restore stability’ to the economy in Labour's first budget since 2010.

The Chancellor announced changes that are expected to raise an additional £40 billion which will help tackle the reported £22 billion ‘black hole’, whilst claiming that the measures protect working people. 

Read all the headline announcements to see what this could mean for you and your business.

Employers National Insurance Contributions (“NIC”)

From 6 April 2025, the rate of employer NICs will increase by 1.2 percentage points to 15% and the threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year. 

To support small business, the Employment Allowance (reducing employers NIC liabilities) will increase from £5,000 to £10,500 and removing the £100,000 threshold. 

As at April 2023, the median gross annual earnings for full-time employees was £34,963, therefore, disregarding the Employment Allowance, the increased annual cost for businesses will be £925 per employee in this scenario. 

Capital Gains Tax

As of 30 October 2024, the basic and higher rates of Capital Gains Tax (“CGT”) are increasing to 18% and 24%, respectively, which brings the CGT rates in line with that for gains on residential property disposals. 

There will be no change to the current Business Asset Disposal Relief (BADR) limit of £1m, however, the BADR rate will increase to 14% from 6 April 2025 and will then match the lower CGT rate of 18% from 6 April 2026.

Employee Ownership Trusts and Employee Benefit Trusts

The government is introducing a package of reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts. The purpose of these reforms is to prevent opportunities for abuse, these changes will include ensuring former owners cannot retain control of the company post-sale by retaining control of the Employee Ownership Trust and requiring that reasonable steps are taken to ensure that the consideration paid on disposal of shares to the trustees does not exceed market value. The changes also increase the period of time within which relief can be withdrawn from the individual if the Employee Ownership Trust conditions are breached post-disposal, the period will be extended to four tax years.

The changes will take effect from 30 October 2024.

Income Tax and Employee’s NIC

The Income Tax and NIC thresholds for individuals will remain frozen until April 2028, thereon rising in line with inflation from April 2028.

There were no reported changes to the personal allowance and Income Tax/NIC rates for individuals. 

National Minimum Wage

From April 2025, the National Living Wage will increase to £12.21 per hour for all eligible employees and the National Minimum Wage (NMW) for 18-20 year olds will be £10.00 per hour.

Corporation Tax 

No changes to the rates of corporation tax have been announced.  

The Corporate Tax Roadmap includes a commitment to:

• cap the corporation tax rate at 25%; 
• maintain Small Profits Rate and marginal relief at current rates and thresholds; 
• maintain key features such as Full Expensing, Annual Investment Allowance, R&D relief rates and the Patent Box.

Capital Allowances

100% First Year Allowances for qualifying expenditure on zero emission cars and electric vehicle charge points has been extended to 31 March 2026 for corporation tax and 5 April 2026 for income tax.

Double cab pickups (DCPU) are to be treated as cars for capital allowances purposes from 1 April 2025 for Corporation Tax and 6 April 2025 for income tax.  

The Government is to explore full expensing to assets bought for leasing or hiring when fiscal conditions allow.  For the moment full expensing remains unavailable for assets bought for lease or hire.

Close company Loans to Shareholders

The Government will ensure shareholders cannot extract funds untaxed from close companies by legislating to remove opportunities to side-step the anti-avoidance rules attached to the loans to participators regime.  This change will apply from 30 October 2024.

Annual Tax for Enveloped Dwellings (‘ATED’)

ATED annual chargeable amount will be uplifted by September CPI of 1.7% for 2025-2026 ATED chargeable period.

VAT

The Government have confirmed that the changes to VAT on private schools will go ahead as planned.  Standard Rate VAT of 20% will be applied on private school fees from 1 January 2025 and any fees paid from 29^th July 2024 relating to the term starting in January 2025 will be included within the charge to VAT.

Schools that are not already registered for VAT need to consider how this will impact them, the potential scope to reclaim VAT on expenses and will need to submit their application to register for VAT as soon as possible.

The Government will also remove Business Rates relief for private schools from 1 April 2025.

SDLT

Starting from 31 October 2024, the Higher Rates for Additional Dwellings surcharge on Stamp Duty Land Tax (SDLT) for will be increased from 3% to 5%.   This applies to purchases of second homes, investment property and company acquisitions.

The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by 2 percentage points from 15% to 17%.

Fuel Duty

Fuel duty rates will be frozen for 2025/26 and the temporary 5p cut in fuel duty rates will be extended by 12 months and expire on 22^nd March 2026.

Alcohol Duty

The Government will cut alcohol duty rates on draught products below 8.5% alcohol by volume (ABV) by 1.7%, so that an average ABV strength pint will pay 1p less in duty. Alcohol duty rates on non-draught alcoholic products will increase in line with RPI inflation. These measures will take effect from 1 February 2025. The current temporary wine easement will also end as planned on 1 February 2025.

Inheritance Tax

The IHT thresholds were previously frozen until 5 April 2028 but this freeze will now extend until 5 April 2030 meaning that until then the nil-rate band (NRB) will remain at £325,000 the residence nil-rate band (RNRB) at £175,000 and the RNRB taper threshold at £2,000,000.

Changes to pension funds

Unused pension funds upon the death of a scheme member will, from 6 April 2027, be included within the value of their estate for IHT purposes where currently they are not. The Government are currently consulting as to how they might implement this change and it is intended that it will be the scheme administrator who will be responsible for reporting and paying the tax due.

Inheritance Tax Reliefs

Farmers and business owners have historically been able to pass their businesses and agricultural property down to the next generation, without having to be concerned about Inheritance Tax on those assets. However, it was announced in the House today that, from April 2026, only the first £1m of assets will be 100% relieved by Business Property Relief (BPR)/Agricultural Property Relief (APR), with only 50% relief applying on the amount exceeding this threshold. This means there will effectively be an Inheritance Tax charge payable at 20% on the excess over £1m. 

In cases where the total value of the qualifying assets eligible for 100% relief exceeds the allowance of £1m, the allowance will be allocated proportionately among those assets qualifying for relief. This allowance covers property within the estate at the time of death, lifetime transfers to individuals occurring within the 7 years preceding death, and chargeable lifetime transfers that incur an immediate lifetime charge such as transfers into trust. In certain cases where the applicable rate is already 50% these changes will not affect such assets. 

If a person dies on or after 6 April 2026, the new rules will apply to lifetime transfers made from 30^th October 2024 onwards where the person dies within 7 years of making the transfer, meaning that the gift would be assessed to IHT upon their death based on the new reduced availability of BPR/APR. 

Shares listed on the Alternative Investment Market (AIM) will, when the new rules take effect, only attract 50% relief and not benefit from the £1m allowance. 

When calculating 10-yearly IHT charges and IHT exit charges for relevant property trusts it is intended that from 30^th October 2024 onwards all trusts set up by the same settlor will share one £1m allowance, however, trusts already in existence before 30^th October 2024 will each qualify for their own £1m allowance. 

Non-Domiciled Individuals & Inheritance Tax

From 6 April 2025 onwards liability to IHT will no longer be based on domicile and will instead be based on long-term residence. An individual will be regarded as long-term resident, with the effect that their non-UK assets will be within the scope of IHT, when they have been resident in the UK for at least 10 out of the last 20 tax years.

If a person subsequently becomes non-UK resident for at least 10 consecutive tax years then this test will reset and they will no longer be regarded as long-term resident. For those who were previously classed as 'deemed domiciled' in the UK (but who are not UK domiciled under common law), having been resident here for at least 15 out of the last 20 tax years, if they are not resident here for tax year 2025/26 then the previous test will continue to apply unless they again become resident in the UK.

Where a person is UK resident for between 10 and 13 out of the last 20 tax years, they will remain within the scope of IHT on their non-UK assets for 3 tax years after becoming non-UK resident. Thereafter this will increase by one tax year for each additional year of residence i.e. 4 years for 14 years of residence, 5 years for 15 years of residence etc. until 19 years of residence. As explained above, after 10 tax years of non-residence the long-term residence test is reset.

Property held in trust prior to Budget day which was 'excluded property' for IHT purposes will not be liable to IHT under the gift with reservation of benefit (GWRB) provisions or the regime for qualifying interest in possession (QIIP) trusts as it would be currently, however where the relevant property regime applies it will be subject to such charges as apply to property within the scope of that regime.

For new QIIP trusts set up in future, and for relevant property trusts, liability to IHT for non-UK assets of the trust will depend on whether or not the trust's settlor is regarded as long-term resident from time to time (and for QIIPs where the settlor is still living at 6 April 2025 property will only be excluded if the QIIP beneficiary is not long-term resident too) meaning that settled assets come in and out of charge based on the long-term residence status of the settlor at the time of the charge, or, for deceased settlors, their long-term residence status at the time of their death.

Elections will still be able to be made by spouses of long-term residents who are not themselves long-term resident in the UK to be treated as such in order that the spousal exemption for IHT might be unlimited and not restricted to just £325,000. From 6 April 2025 onwards such elections that are made will remain in place until the person who has made the election has been non-UK resident for at least 10 consecutive tax years. Elections made before 30 October 2024 will remain in place until the person who has made the election has been non-UK resident for at least 4 consecutive tax years and will for periods prior to 6 April 2025 cause that person to be deemed domiciled for IHT purposes and from that date onwards to be treated as long-term resident.

If you would like to discuss any of these matters or talk to us about your tax affairs in general, please contact our Tax Experts at enquiries@teamjs.co.uk.