The UK has just seen its first female Chancellor of the Exchequer, Rachel Reeves, deliver the Autumn Budget for 2024. In her debut budget, Reeves announced £40 billion in tax hikes, with businesses shouldering a good portion of this increase. If you’re a business owner or just trying to keep up with the financial shifts, here’s a breakdown of the changes that might impact you.
Major Tax Changes in the 2024 Autumn Budget
This budget brings a mix of higher taxes, especially through changes to National Insurance and Capital Gains Tax. The increase in employer National Insurance rates, along with lowered payment thresholds, is set to generate around £25 billion for the Treasury. While there’s some relief with the continued freeze on fuel duty and an increased Employment Allowance from 2025, many business owners will still feel the pinch from rising National Insurance Contributions (NIC). Let’s dive into the specifics.
Employer National Insurance Changes
One of the big shifts in this budget is a hike in the employer NIC rate:
- Current Rate: Employers pay 13.8% NIC on wages over £9,100.
- New Rate from April 2025: This rate jumps by 1.2% to 15%.
- Threshold Adjustment: The NIC threshold is dropping from £9,100 to £5,000, staying there until April 2028, with annual inflation adjustments expected after that.
To ease the burden, the Employment Allowance will increase from £5,000 to £10,500, and the eligibility threshold will be lifted. However, single-director companies may still see their NIC costs rise if the director is the only employee earning above the Class 1 NIC threshold.
Capital Gains Tax (CGT) Changes
Capital Gains Tax is also seeing some important adjustments:
- Rates on Residential Property: No changes here; they remain at 18% for basic rate taxpayers and 24% for higher rate taxpayers.
- Rates on Other Assets: For other assets like shares, CGT rates will increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers with effect from 30th October 2024.
- Carried Interest: The CGT rate on carried interest will rise to 32% starting April 2025.
For business owners, Business Asset Disposal Relief (BADR)—a valuable relief for those planning to retire or sell—will also see changes. The Capital Gains Tax rate for BADR and Investors’ Relief increases from 10% to 14% in April 2025, and to 18% in April 2026. Investors’ Relief’s lifetime limit also drops to £1 million.
Stamp Duty Land Tax (SDLT) – England Only
As of 31st October 2024, the following changes will apply:
- Main Homes Stamp Duty Threshold: Starting in April, the threshold for paying stamp duty on a primary residence will be reduced from £250,000 to £125,000, undoing a prior tax reduction.
- First-Time Buyers’ Stamp Duty Threshold: The stamp duty threshold will also be lowered, decreasing from £425,000 to £300,000.
- Additional Dwellings Surcharge: Stamp Duty rises by 2%, making it 5% for additional dwellings.
- Corporate Purchases: For properties over £500,000 bought by corporate bodies, SDLT increases from 15% to 17%.
Inheritance Tax
The nil rate band for Inheritance Tax (IHT) remains at £325,000, with an additional £175,000 residence nil rate band. These thresholds, initially frozen until April 2028, will now stay locked in until April 2030. The Chancellor also hinted at adjustments:
- Agricultural and Business Property Relief: Full 100% relief applies only to the first £1 million of assets; anything above that sees a drop to 50%.
- Unlisted Shares: For unlisted shares, business property relief drops from 100% to 50%, meaning assets outside recognized exchanges are now partially taxable.
Starting 6 April 2027, Inheritance Tax rules will change significantly for pensions. Most unused pension funds and death benefits will become part of an individual’s taxable estate. Additionally, pension scheme administrators will be responsible for both reporting to HMRC and paying any Inheritance Tax due on pension assets.
Income Tax & NIC Thresholds
Expect these thresholds to stay frozen until March 2028, with future adjustments linked to inflation.
Business Rates – England Only
In a move to support high street businesses:
- Relief for Retail, Hospitality, and Leisure: Temporary relief becomes permanent for properties with a rateable value below £500,000 starting in 2026.
- Multiplier Adjustments: A higher multiplier will apply to properties valued above £500,000 from 2026.
Capital Allowances on Zero-Emission Cars
Aligned with the Government’s commitment to achieving net-zero greenhouse gas emissions by 2050, electric vehicle incentives are being maintained.
The 100% First Year Allowance for qualifying expenditure on zero-emission cars, as well as plant and machinery for electric vehicle charge points, has been extended for another year.
These first-year allowances will now expire on 31st March 2026 for corporation tax purposes and 5th April 2026 for income tax purposes.
Research and Development (R&D) Updates
The Chancellor will explore expanding advance clearances for R&D relief in Spring 2025, as part of ongoing efforts to reduce error rates in tax claims.
Interest on Late Paid Tax
To encourage timely payments, the interest rate on unpaid taxes will increase by 1.5%, reaching 9% from April 2025.
National Minimum Wage Adjustments
Starting from April 2025:
- National Living Wage: Up by 6.7% to £12.21 per hour for those aged 21 and over.
- Wages for Younger Workers: An increase to £10.00 per hour for 18-20 year-olds, with similar boosts for under-18s and apprentices.
VAT on Private School Fees
From January 1, 2025, private school fees will include VAT at the standard 20%. Additionally, charitable rate relief on business rates for private schools will end in April 2025.
Payroll Reporting for Benefits in Kind (BIKs)
Starting from April 2026, it will be compulsory to report benefits in kind using payroll software. However, the reporting of loans and accommodation will remain optional and subject to review.
Company Car Tax
The company car tax rates have been set through to the 2027/28 tax year. Importantly, the tax rate for electric vehicles will increase from 2% in 2024/25 to 5% by 2027/28. This rise indicates that salary sacrifice schemes will remain advantageous for both employers and employees, providing national insurance savings.
Non-Dom Tax Regime Reforms
The preferential tax treatment for non-domiciled individuals will be phased out from April 6, 2025. A new residence-based tax system will limit relief on overseas income and gains to the first four years of UK residency.
Need Expert Guidance?
To navigate these new rules smoothly and protect your financial interests, reach out to Accounting People for personalised advice.