Autumn Budget 2024: what does it mean for you and your business?

By Stuart Noakes, Partner and Head of Tax Services, Carpenter Box.

The Chancellor of the Exchequer, Rachel Reeves, delivered her first Budget on October 30. She highlighted Labour’s ambitious plans to tackle the UK’s financial challenges and invest in infrastructure across health, education, housing, and transport.

Our tax team has provided a summary of the key points announced for individuals and businesses.

Individuals

Capital Gains Tax (CGT): From 30 October 2024 the lower and higher main rates of Capital Gains Tax will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. There is no longer a secondary higher rate for residential properties as the rates have been aligned.

Inheritance Tax (IHT): Inheritance Tax nil rate bands will be frozen at their present levels until April 2030 (extended by two years from the previously announced date); there is no change to the availability of the additional Residence Nil Rate Band.

Pension funds: From April 2027 an individual’s pension will be treated as part of their estate for IHT purposes (currently there is no IHT charged, although in some cases a tax charge will apply to lump sums or income drawn by the beneficiary). This may have a considerable impact on the tax and investment planning arrangements of individuals.

Stamp Duty Land Tax (SDLT): From 31 October 2024, the Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax will increase from 3% to 5%. The HRAD applies to the purchases of second homes, buy-to-let residential properties and to companies purchasing residential property. Those who exchanged contracts prior to 31 October 2024 will not be affected by this rate increase. The single rate of SDLT that is charged on the purchase of ATED dwellings costing more than £500,000 by corporate bodies will also increase by 2%, from 15% to 17%.

Foreign domiciled individuals: From 6 April 2025, those who are resident in the UK but domiciled overseas will no longer have access to the ‘remittance basis’ of taxation, which up to now has allowed them to elect to not be taxed in the UK on foreign income and gains if they leave the money overseas. There are also significant changes to the assets that will be within charge to IHT for those previously regarded as foreign domiciled, and to Overseas Workday Relief that can exempt them from UK tax on earnings derived from non-UK duties.

Furnished Holiday Lets (FHL): No further changes were announced in relation to the abolition of the FHL regime. A policy paper and draft legislation were published in July and these were in line with the proposed changes announced by the previous government.

Employers

NLW and NMW: From April 2025 National Living Wage (21+) will increase to £12.21 p/h (from £11.44) and National Minimum Wage (18-20) will increase to £10.00 p/h (from £8.60).

Employers National Insurance Contributions (NIC): From 6 April 2025 the rate of employers NIC will increase from 13.8% to 15%. The threshold in which employers start paying employers NIC will be reduced from £9,100 per year to £5,000 per year. The Employment Allowance will increase from £5,000 to £10,500 and will be available to businesses whose employer’s NIC liability exceeds £100,000 (where previously these businesses would not have qualified for the allowance). Employment Allowance is available to ‘eligible employers’ – as such the allowance continues to be unavailable to employers who employ only one person, and that person is a director of the business.

Employee Ownership Trusts (EOT): There have been some changes made to tighten the rules regarding the taxation in connection with the use of EOTs and business sales. The changes are effective to disposals taking place from 30 October 2024.

Businesses

Business Asset Disposal Relief (BADR) and Investors’ Relief: From 6 April 2025 the rate for BADR and Investors’ Relief will increase to 14% (from 10%) and will increase again to match the lower main rate at 18% from 6 April 2026. The lifetime allowance for BADR remains at £1m. The lifetime limit for Investors’ Relief will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for BADR.

Business Relief (BR) and Agricultural Property Relief (APR): BR and APR provide (at present) an unlimited 100% IHT relief for qualifying assets. It is proposed that 100% IHT relief is given only for the first £1m of BR and APR assets, but thereafter such assets will benefit from 50% relief (i.e. an effective IHT rate of 20%). However, for shares on AIM (and “similar markets”) there appears to be no £1m allowance but 50% relief (i.e. an effective IHT rate of 20%). A technical consultation will be published in early 2025.

Creative Tax Reliefs: From 1 April 2025, qualifying companies will be able to claim an enhanced Audio-Visual Expenditure Credit rate of 39% on their UK VFX costs (increased from 34%). The anticipated exclusion of Generative AI costs from the uplift was not included in the Budget.

Independent Schools and VAT: The government confirmed that it would be introducing a VAT charge at the standard rate (20%) on education and boarding services, where these are provided by private fee-paying schools with effect from 1 January 2025. With effect from April 2024, Independent Schools in England will lose their entitlement to business rates charitable rate relief, unless they “wholly or mainly” provide full time education to pupils with an Education, Health and Care Plan.

How we can support you

Carpenter Box’s award-winning tax team will be happy to help you adapt and reassess your plans in light of any legislative changes. Our colleagues at Carpenter Box Financial Advisers are always on hand to help manage your investments and pensions.

Please visit our dedicated Budget Hub which includes more details on the announcements as well as video reactions from our team.

Information correct  as of 30 October 2024.