UK Budget – Autumn 2024

The UK Autumn Budget delivered by the Chancellor, Rachel Reeves, focussed on the Government’s aim to deliver economic stability whilst also setting the Government’s growth programme.

The headline measures were broadly  anticipated, although  there were a few unexpected announcements. From a business point of view, employer National Insurance contributions will rise to 15% (a rise of 1.2%), whilst the secondary threshold will be reduced to £5,000 per year. For small businesses, the Employment Allowance will be increased to £10,500 per year.

As expected, the Chancellor announced the publication of a Corporate Tax Road Map and reconfirmed that the corporation tax rate would be capped at 25% for the life of the parliament, whilst full expensing, the £1 million annual investment allowance and the current rates for research and development (R&D) reliefs will be retained.

The rate of Energy (Oil and Gas) Profits Levy (EPL) will increase to 38% and be extended to March 2030. The 29% investment allowance will be abolished, though the 100% First Year Allowance will be retained along with decarbonisation relief.

Going forward, there will be two permanent lower levels of business rates for retail, hospitality and leisure business and, in the short-term, there will be a transitional 40% relief for 2025-26, up to a cap of £110,000 per business.

For individuals, there was a surprise in the news that income tax thresholds (outside Scotland, which sets its own thresholds) would not be frozen beyond April 2028 and the personal allowance (which applies throughout the UK) would therefore be uprated by indexation from that date. There are, however, rises in the rates of capital gains tax — the lower rate of 10% will rise to 18% and the upper rate from 20% to 24%. The rates for residential property remain at 18% and 24%. The lifetime limit for Business Asset Disposal relief remains at £1 millionthough the Investors’ Relief lifetime limit will be reduced from £10 million to £1 million. From April 2025, the relief will be given at 14%, and at 18% from 2026.

There are also changes to inheritance tax (IHT), with the nil-rate thresholds being frozen until 2030 and inherited pensions being included in the scope of inheritance tax with effect from April 2027. There are particular changes to Agricultural Property Relief and Business Property Relief from April 2026, with amounts qualifying for these reliefs under £1 million being free from IHT, but higher amounts will be subject to IHT at 20% (providing 50% relief). There will be a similar 50% relief for shares listed on AIM.

Changes to the treatment of non-UK domiciled taxpayers are to be taken forward from April 2025, but there will be amends to the Temporary Repatriation Facility, extending it to three years and expanding its scope.

For the fund management industry, the capital gains tax rate applicable to carried interest will increase to 32% from April 2025, with further changes to be considered from April 2026, to make the rules better targeted. A consultation on what that revised regime might contain (in particular, a minimum co-investment requirement and a minimum period between a carried interest award and receipt) runs until 31 January 2025.

For properties, the rate of Stamp Duty Land Tax surcharge payable on the purchase of additional dwellings (second homes) will rise by 2% to 5% from 31 October 2024.

When it comes to indirect and other taxes, the Chancellor announced rises in air passenger duty and confirmed the introduction of VAT on private school fees from January 2025. The Chancellor also announced that legislation will be brought forward for the removal of business rate relief for private schools from April 2025. There was a reduction in alcohol duties in respect of draft duty and confirmation that fuel duty would not increase in 2025.

In terms of HMRC’s compliance activities, the Chancellor promised modernisation of HMRC’s systems and the recruitment of new staff. There will be an increase in the interest rate on unpaid tax debts and HMRC will target umbrella companies and promoters of tax avoidance schemes.