Autumn Budget 2024: Initial Reaction
Steve Wren and Kieron Clement-Smith share their quickfire summary of Rachel Reeves’ historic first Budget, and the raft of major reforms and tax changes she announced, including an increase to employers’ NIC contributions, which is expected to raise £24bn per year.
In a packed and raucous House of Commons, Rachel Reeves stood up to deliver the long overdue first Budget Statement by a female Chancellor of the Exchequer in its 800-year history. An early admission of £40 billion in tax rises prompted gasps across the nation and we have much to analyse and ponder in the coming days. However, it’s clear that the majority of these tax increases will come from an increase in employer NIC contributions, which is expected to raise £24bn per year over the next five years (source: OBR).
SRLV’s Tax Partner Steven Wren and Tax Director Kieron Clement-Smith summarise the initial highlights and points of interest from a budget of real significance.
National insurance
- Employers’ national insurance contributions increased by 1.2% to 15% from April 2025. The government will also reduce the secondary threshold from £9,100 to £5,000. These measures are expected to raise £24bn a year.
- ‘Employment allowance’ increased to £10,500 for all businesses from April 2025.
Income tax
- There will be an increase in the thresholds on income tax and national insurance in line with inflation from April 2028.
Capital gains tax (CGT)
- As expected, the rates of CGT will be increased. The lower rate will be raised from 10% to 18%, while the higher rate will rise from 20% to 24%. These are effective immediately (disposals on or after 30 October 2024).
- The business asset disposal relief (BADR) £1m lifetime limit for entrepreneurs selling their trading businesses will be retained, but the rate of CGT will increase to 14% in April 2025, and then to 18% in April 2026.
- Fund management executives will be suffering tax on ‘carried interest’ at a rate of 32% from April 2025, and from April 2026 reforms to bring ‘carried interest’ within the income tax regime will be introduced.
Inheritance tax (IHT)
- The IHT nil-rate band (£325,000) and residence nil-rate band will be retained at current levels until at least April 2030.
- There will be a reform of business property relief and agricultural property relief from April 2026. The first £1m of combined business and agricultural assets will attract 100% relief from IHTR, but thereafter only 50% relief, so an effective IHT rate of 20%.
- From April 2026 Alternative Investment Market (AIM) listed shares will only receive 50% business property relief (without being within the £1m amount mentioned above), resulting in an effective IHT rate of 20% from that date.
- Pensions and Death Benefits will also be brought within the scope of inheritance tax from April 2027.
Private school fees
- 20% VAT will apply to education and boarding fees for private schools from 1 January 2025. The schools themselves will also no longer be able to claim business rates reliefs for Charities.
Corporate tax and business rates
- Corporate tax rates remain at 25% and research & development tax reliefs will be retained.
- Creative tax reliefs will come in as announced in the Spring Budget.
- Businesses will receive 40% relief on business rates for retail, hospitality and leisure businesses (up to a cap of £110,000 per business) from April 2025.
Non-doms
- From April 2025 the concept of domicile will be abolished, and an ‘overseas workday relief’ cap will be introduced, though the ‘temporary repatriation facility’ will be extended to three years (from two). We will write further on this in the coming days.
Stamp duty land tax (SDLT)
- The SDLT surcharge on purchasing an ‘additional property’ (not a first or main home) will increase to 5% (from 3%) effective from 31 October 2024.
Minimum wage
- Reeves confirmed that the ‘national living wage’ for over-21s will increase by 6.7% to £12.21 per hour from April 2025. For 18 to 20-year-olds, the ‘national minimum wage’ will rise to £10 per hour. Over time, the national minimum wage and national living wage rates will align.
Planes / private jets
- Air passenger duty will increase by up to £2 per economy short-haul flight, but private jet flights will attract an extra 50% air passenger duty, up to £450 per passenger.
Other
- Reeves said the government will raise £6.5bn through targeting tax avoidance, including by umbrella companies.
- There are plans in the next five years to recruit 5,000 compliance officers and 1,800 debt management specialists into HMRC and to modernise their IT and data systems.
- The government will increase the rate of interest charged on tax paid late by 1.5%.
- Fuel duty has been frozen, and there is to be a reduction on alcohol duty on draught drinks below 8.5% abv.
Our in-depth analysis of the announcements has since been published here.