Autumn Budget 2024
Labour’s first Budget in over a decade has been unveiled, bringing significant changes that will impact businesses, individuals, and investors across the UK. As expected, the reforms introduce new challenges, particularly for small business owners, property investors, and those with substantial estates. In this detailed analysis, we break down the key measures announced and their potential implications.
Key Highlights of the Autumn Budget 2024
National Insurance and Income Tax Changes
A major announcement in this Budget is the increase in National Insurance Contributions (NICs) for employers. The rate will rise from 13.8% to 15%, adding a substantial burden to business owners. Furthermore, the earnings threshold for NICs has been lowered from £175 per week to £96.15 per week, meaning more employees will now fall within its scope.
To offset some of this impact, the Chancellor has doubled the Employers' Allowance from £5,000 to £10,500, offering some relief to small businesses. However, the overall effect is still likely to be a net increase in costs for most employers.
Additionally, from April 2026, all benefits in kind will be processed exclusively through payroll, streamlining administration but also increasing tax liabilities for employees and employers alike.
Business owners with Double Cab Pickups (DCPUs) should take note of the planned reclassification. Previously treated as vans for tax purposes, these vehicles will be taxed as cars from April 2025, increasing benefit-in-kind and capital allowance liabilities.
Capital Gains Tax (CGT) Adjustments
Changes to Capital Gains Tax are also on the horizon. The basic rate is set to rise from 10% to 18%, while the higher rate will increase from 20% to 24%.
For business owners, the Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, is being temporarily frozen. However, the tax rate on qualifying disposals will climb to 14% in 2025 and then further to 18% in 2026. This could impact decisions on when to sell businesses, prompting some to accelerate their exit plans before the higher rates take effect.
Inheritance Tax (IHT) Overhaul
The farming community and business owners will feel the brunt of the changes to Inheritance Tax. Business Property and Agricultural Property Reliefs will now be capped at £1 million, with any value exceeding this threshold receiving only 50% relief. This effectively introduces a 20% tax on inherited agricultural and business property valued above £1 million.
Other significant IHT changes include:
The retrospective inclusion of unused pension funds in estate valuations, dating back to 6 April 2017.
A reduction in tax relief on AIM share portfolios, decreasing from 100% to 50%.
Stamp Duty Land Tax (SDLT) Increases
Property investors and homebuyers in England and Northern Ireland will be directly affected by the new SDLT measures, which take effect from 31 October 2024. Higher SDLT rates will apply, ranging between 5% and 17%, depending on the purchase price of the property. This move is expected to slow down activity in the property market and discourage buy-to-let investments.
Non-Domiciled Tax Status Abolished
The longstanding non-domiciled tax status is being replaced with a residence-based taxation system. This fundamental change aligns the UK with many other countries that tax global income based on residency rather than domicile status. The specifics of the new regime remain to be fully detailed, but it is anticipated to affect high-net-worth individuals who have previously benefitted from favourable tax treatments.
Additional Noteworthy Measures
Pension Reforms: Changes to pension tax relief were hinted at but not fully outlined in this Budget. More details are expected in the coming months.
Business Investment Incentives: Some incentives remain in place for capital investment, but the overall tax burden on businesses has increased, making future investment decisions more complex.
Public Spending and Economic Growth: The government remains committed to improving public services and infrastructure, but the Budget did not provide extensive new spending plans beyond those already announced in previous statements.
How Can Businesses and Individuals Respond?
With so many financial and tax changes coming into play, it is crucial to reassess business and personal financial plans. Here are some key considerations:
Review Business Structures: Employers need to evaluate the impact of increased NICs and consider strategies to mitigate rising employment costs.
Plan Asset Disposals Wisely: With CGT rates increasing, those planning to sell businesses or properties should carefully consider timing.
Reassess Estate Planning: Given the changes to IHT, business owners and farmers may need to explore gifting assets earlier or implementing new inheritance strategies.
Seek Expert Tax Advice: The shifting landscape means that professional guidance is more valuable than ever to navigate these tax increases efficiently.
Final Thoughts
The Autumn Budget 2024 introduces a raft of tax increases and regulatory changes, placing additional pressure on businesses and individuals alike. While some relief measures have been put in place, the overall impact will likely be a greater tax burden for most.
For those affected, taking proactive steps—whether restructuring finances, reviewing estate plans, or seeking expert advice—will be essential to mitigating the financial strain of these new measures. If you need support in understanding how these changes affect your situation, get in touch with us today.