As the UK faces ongoing economic challenges, the Autumn Budget 2024 stands as a crucial moment for the government to outline its fiscal strategy and address pressing concerns affecting households and businesses alike. This budget not only introduces significant tax changes aimed at raising £40 billion annually but also reflects the government’s commitment to ensuring fairness within the tax system.
In this article, we will explore the key highlights of the budget, including adjustments to income tax, capital gains tax, inheritance tax, and support for the cost of living. No changes to VAT and Corporation Tax rates have been announced.
Income Tax
Rachel Reeves, chancellor of the Exchequer, has quashed one of the biggest fears people had about the Budget, by announcing there will be no additional freeze in the income tax thresholds. It means from 2028/29 they’ll be uprated with inflation. It will bring an end to the rapid escalation of people paying more tax at higher rates.
As announced by the previous Conservative government, it has been confirmed that the remittance basis of taxation for non-UK domiciled individuals (non-doms) will be abolished from 6 April 2025 and replaced with a residence-based regime for the first four years of residence. Please check our previous article on The abolition of the non-dom status for more information.
Other changes include the abolition of the Furnished Holiday Lettings regime (FHL) from 6 April 2025 and the inclusion of sole traders and landlords with income over £20,000 in the Making Tax Digital for Income Tax (MTD ITSA) reporting by the end of the parliament.
Capital Gains Tax
As part of Autumn Budget’s £40bn increase in taxes, the chancellor Reeves confirmed an immediate capital gains tax (CGT) hike for disposals mad on or after 30 October 2024. That means that taxpayers will now pay more CGT on any profits from selling assets, including shares.
It was confirmed that the lower rate of CGT will rise from 10% to 18% and the higher rate from 20% to 24%. These changes are effective immediately and align the CGT rates with those on sales of residential property.
The Chancellor has also confirmed that the rate of capital gains tax on business assets qualifying for Business Asset Disposal Relief (BADR) and Investors’ Relief will increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026, while the Investors’ Relief lifetime limit is immediately reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024.
Inheritance Tax
Reeves agreed to extend the inheritance tax (IHT) threshold freeze for another two years to 2030 – meaning more people will now likely pay IHT in the future. The first £325,000 of the estate (which might include property, money and possessions) will fall into the nil rate band any will not attract any IHT. If the assets include a family home given away to children or grandchildren, a further £175,000 residence nil rate band will be available.
The chancellor also confirmed she will bring inherited pensions into the IHT regime from April 2027. At the moment, pensions are usually passed on tax free if a person die under the age of 75 or taxed at the beneficiaries’ marginal rate of income tax if the person is over 75. From 30 October 2024 there will be also further changes to the rules for overseas pensions.
Businesses
As mentioned earlier, this budget includes significant tax changes aimed at raising £40 billion annually. Corporation tax rates have not been raised, however, the government has announced that the National Insurance Contributions (NICs) for employers will increase by 1.2% to 15 from 6 April 2025.
Furthermore, the Secondary Threshold, which is the point at which employers become liable to pay NICs on employees’ earnings, will be reduced from £9,100 to £5,000 a year from 6 April 2025. On the other hand, the Employment Allowance which currently allows businesses with employer NICs bills of £100,000 or less to deduct £5,000 from their employer NICs bill, will allow business to deduct £10,000 from 6 April 2025.
A new Corporate Tax Roadmap was introduced to clarify the future plans for corporation tax and other taxes, while Reeves has confirmed that the 75% discount to business rates which is due to expire in April 2025 will be replaced by a discount of 40%. These measures reflect the government’s focus on providing stability and encouraging investment within specific high-impact sectors while balancing tax reforms
Support for cost of living and other changes
The Autumn budget includes measures to address cost-of-living pressures and boost key sectors. The National Minimum Wage will increase by 6.7% to £12.21, while younger workers aged 18-20 will see a substantial 16.3% rise. The Chancellor also announced a freeze on fuel duty, supporting households amid fluctuating fuel prices.
Other changes include an increase in the stamp duty land tax (SDLT) surcharge for additional properties from 3% to 5% above the standard residential rates from 31 October. Additionally, VAT will be applied to private school fees starting from 1 January 2025. These moves are intended to increase fairness in the tax system and contribute to public finances.
Conclusion
In summary, The UK Budget 2024 is set to be a pivotal moment for the country’s economic future. With a focus on addressing the fiscal deficit, managing public services, and introducing targeted tax reforms the Autumn Budget 2024 has unveiled a series of significant tax reforms and support measures designed to navigate the challenges of rising living costs and enhance revenue generation.
For more insights on this UK Autumn budget or if you would like to discuss how these changes in tax policy may affect you and/or your business, please contact us.
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