Autumn Budget 2024
After a longer than usual delay due to the July election and MP’s holidays, the chancellor Rachel Reeves has now released her Autumn 2024 Budget. This lengthy delay led to many leaks and forecasts that have largely turned out to be inaccurate and the bad news was not as bad as predicted, but there were some significant announcements that I shall put in the order I believe will most affect our clients.
Capital Gains Tax
The rates charged on shares and other assets are increased from 10% to 18% and 20% to 24% respectively from 30th October 2024. Business Asset Disposal Relief is retained but will be at 14% next year and 18% the year after. Residential Property rates are unchanged. Overall a modest change compared to forecast but a significant increase on certain assets.
Inheritance Tax
Reducing Agricultural Property Relief and Business Property Relief to 50% for assets over £1 Million will create issues for medium and larger businesses in terms of succession. Limiting BPR to 50% on AIM investments limits the effectiveness of this planning. The allowances have been frozen until 2030 creating more Fiscal Drag as set out in our 2022 Autumn Statement Blog. However the big change was that Pension Schemes will be subject to IHT from 2027 which will lead to a lot of people reviewing how they access savings in a pension scheme and how they save. The changes to regulations on QROPS may add to pension advice complexity!
NI Contributions
Despite Labour’s promise to not raise NI from its current rate of 13.8%, the chancellor has raised NI for employers to 15% and perhaps as importantly reduced the threshold from £9,100 to £5,000. The increase in Employment Allowance to £10,500 will remove this cost for the smallest businesses but larger businesses will have significantly increased costs of employing UK staff. When combined with minimum wage increases, a significant driver of inflation but also an incentive to move more work abroad. Mandation of reporting BiKs through payroll from April 2026 will add to employers payroll costs.
Income Tax
A continuation of the freeze on income tax thresholds will push more and more earners into the higher tax thresholds. Following a Court of Appeal judgement, the government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for certain tax purposes from April 2025.
Capital Investment
£70 Billion of additional investment was announced, with some very welcome. However the change to the borrowing rules where Net Debt is used means this will not be recorded fully as a debt and reduces debt overall. A similar approach to the PFI introduced by Gordon Brown!
Government Interest
The rate of interest on late payments to HMRC will increase to Base Rate plus 4%, an increase of 1.5% on the current rate.
Business Rates
The 75% discount reduced to 40% and capped at £110,000 but only available for Retail, Hospitality and Leisure. This increase of nearly a doubling in rates may be significant enough to force some to close.
SDLT
The end of the SDLT holiday next April, reduction to first time buyer limits, and an increase of the Additional Rate of 3% to 5% for second home purchases and Companies will undoubtedly slow the housing market.