It’s been hard to avoid the media speculation around the budget this year, and now we have heard the formal speech we can see what has really happened. There were a number of firsts – including the fact that it was presented by the first ever female chancellor – but few surprises. Not all the worst fears were realised but there were some significant changes. In this overview, we set out the key measures and importantly, when they will be brought into effect.
Our team will be digesting the detailed announcements from HMRC and the Treasury to analyse the small print and we will be bringing you updates and opinions, so do look out on our website and social channels for those in the coming days. Of course, if you would like to discuss your own specific questions, please do get in touch. For now, the announcements look like this:
Individuals and Trusts
Income Tax and National Insurance Contributions for individuals
There was a commitment in the manifesto not to increase the basic, higher or additional rates of income tax, National Insurance Contributions (NIC) or VAT and this was – broadly – followed. In a partial relaxation of fiscal drag the freeze to the thresholds for Income Tax and NIC will be lifted but not until 6 April 2028. For example, the personal allowance (currently £12,570), will increase in line with inflation for 28/29 onwards.
Capital Gains Tax Changes
Capital Gains Tax (CGT) is paid on the increase in value of an asset on disposal. CGT is paid by fewer than 1% of adults each year and is currently charged at a lower rate of 10% and a higher rate of 20%. These rates have increased to 18% and 24% respectively from 30 October 2024. There have, until now, been separate rates of tax applicable to property transactions which were higher than standard CGT rates. From 30 October, the rates of tax are aligned. Transactions which completed on or before 29 October will attract the lower rates of tax. There are special increases to gains arising from carried interests which will be phased in over the next couple of years.
Structurally, CGT remains steady with business asset disposal relief (BADR) being preserved but the rates of tax – while reduced are not as generous as the present 10%. The rates are 14% for 25/26 and 18% for 26/27. Investment relief is also reduced to £1million in line with the amount qualifying for BADR.
Balbor Sundar explains this in more detail at Autumn Budget 2024: Capital Gains Tax | Mercer & Hole
Inheritance Tax Changes
The big changes to lifetime gifting timelines which were rumoured did not come to fruition. Instead, the nil rate bands are being frozen until 2030 rather than 2028 as previously announced. The freeze is expected to apply to the standard nil rate band of £325,000, as well as the additional residential nil rate band (available for Estates of less than £2m) which enables a potential further £175,000 per person to be passed down tax free where residential property is passed to a direct descendant.
There was no such escape from the widely feared changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). From April 2026 100% inheritance tax relief for Agricultural and Business property is subject to a combined cap of £1million per taxpayer; above this amount relief will only be given at 50%. It is worth noting that any Trusts set up by the same settlor on or after 30 October the £1 million allowance will have to be shared.
Outside of this cap, the IHT relief given on AIM shares has been reduced from 100% to 50% for transfers chargeable to inheritance tax from April 2026.
The detail and impact of these changes has been considered by Mark Baxter in his article here.
Increased Interest rates on unpaid tax
The narrative around the key changes was focussed on responsibility – and this extends to the taxpayers’ responsibility to pay the correct amount of tax on time. To assist the collection of taxes in a timely manner, there will be an increase in the interest rate on late paid taxes and recruitment of more staff in the debt collection departments of HMRC.
For many years taxpayers had the benefit of low interest rates which linked to the bank base rate and thus, were often cheaper than commercial bank borrowing. These rates have of course increased in recent years and become more costly. This change of adding in a surcharge element of 1.5 percentage points, means those with outstanding liabilities will currently incur 9% interest on unpaid tax which may deter using HMRC as a lender.
The change applies across all taxes but, the interaction of increased inheritance tax bills for agricultural and business property – where there is less ability to pay tax promptly – may cause particular concerns. Executors and Trustees will have important decisions to make when considering whether to make use of the 10-year instalment option for instance, or source other means of financing.
Non-Dom tax status
We were already prepared for changes to the non-dom regime which were announced in the March 2024 budget, but it was an election manifesto pledge by the Labour party to make further changes. As we anticipated, the rules (which will come into effect from 6 April 2025) are complex and there are a variety of permutations and qualifying criteria. In essence, for the first four years of residence, an individual is taxed only on their UK source income but after four years, then worldwide taxation comes into play. There are transitional reliefs available for people currently using the remittance basis and we will be producing a more detailed analysis shortly. There are 103 pages of draft legislation to work through, so quite a lot to digest. There are both winners and losers from this overhaul, and so, the key message is that any person who is or has been non-dom, or is thinking about moving to the UK needs to take advice at an early stage. There may be steps to take before the end of this tax year and indeed some matters which may be better deferred into the next tax year 25/26.
Savings Limits on ISA Issues
Despite fears that there would be limits on ISA savings, the existing limits are maintained and no caps on the amounts which can be held were imposed.
Pension Taxation
It was reported the government might be looking at a number of changes which could include reducing the tax-free lump sum which can be taken from pension pots, reducing the tax break for employers paying into employees’ pensions or changing tax relief on pension contributions. As it turns out none of these measures were implemented but there has been a significant change in the IHT treatment of pensions funds.
In this article Iain Muffitt explains the key changes and the implications for you.
Business Issues
The government has published a ‘Corporate Tax Roadmap’ which includes a commitment to cap the Corporation Tax Rate at 25%; maintain the Small Profits Rate and marginal relief, at current rates and thresholds as well as maintain key features as such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box.
It is interesting that there was frequent reference to research and development in the Speech and the reliefs to encourage innovation are maintained when in fact HMRC appears to be on a mission to challenge many submitted claims. This is a policy designed to tackle abuse of the reliefs available but is currently causing a lot of headaches for genuine applicants.
There will be a number of consultations in the coming months so it will be interesting to see the outcome of those consultations.
National Insurance Contributions by employers
In perhaps the least surprising measure announced today, the rate of NIC payable by employers will increase from 13.8% to 15% in April 2025, as expected. The additional reduction of the threshold at which employers start to pay NI from £9,100 to £5,000 annually was more of a surprise alongside the increase to the employment allowance.
You can read more about not just these changes but other measures for Employment Taxes in David Hadley’s article.
Fuel Duty Changes
In a similar vein the 5p fuel duty cut which came into effect in March 2022 has been preserved.
Other pre-announced changes
VAT on Private School Fees – confirmed.
The government has already announced 20% VAT will be charged on private school fees from 1 January 2025.
The implementation of VAT of 20% on private school fees has now been confirmed. This will apply to fees covering terms starting on 1 January 2025. A refund mechanism will be available for Local Authorities that pay for private school fees for pupils with special educational needs.
Despite widespread concerns, the government has proceeded with this previous announced commitment. The full medium and long term impact on both private schools and the potential spill over effect into the state sector remain to be seen.
Winter fuel payments – confirmed.
The government has already announced that from this year, payments will only be made to those receiving pension credit or other means-tested help.
Energy windfall tax -confirmed.
The tax levied on energy profits made by oil and gas firms in the UK will rise 3% to 38% on 1 November 2024; with the levy now also extended run until 31 March 2030.
Furnished Holiday Lettings
Despite uproar from holiday homeowners, there have been no changes to draft legislation published in July 2024; which confirmed the abolition of the Furnished Holiday Letting (FHL) regime with effect from April 2025. Despite the removal of many reliefs, there are still planning opportunities available as business asset disposal relief (BADR) remains available for three years after the cessation of an FHL business.
Final Thoughts about the Autumn Budget 2024…
At this stage, of course, everything is simply announcements of intention and while we have some draft legislation, the full Finance Bill may not be issued until mid-November. There will be developments and refinements as the Bill passes through Parliament, and you need to make sure your decisions are based on the latest information. The articles referenced here and ongoing updates are here which will help you identify the areas which affect you. Above all, the most important thing is to seek advice at an early stage and, as ever, we are happy to help you.
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