Chancellor Rachel Reeves presented the 2024 Autumn Budget on 30th October; the first ever Budget by a female Chancellor. The public were left in little doubt in the lead up that it was to be a “painful” Budget for the taxpayer, with an apparent £22bn or £40bn shortfall to be plugged, but with most major tax rises ruled out by the Government in their election manifesto. It was confirmed in the Budget speech that there would be £40bn of tax rises outlined in the budget.
The big headline grabbers will be Employer’s National Insurance increase along with Capital Gains Tax and Inheritance Tax changes. To see the main announcements, and a reminder of other changes previously announced which are coming into force, and practical guidance on these points and how they may affect you and your business, please read below:
Employers
Increase in National Minimum Wage/National Living Wage
As was announced the day before the Budget, the National Minimum Wage and National Living Wage rates will increase substantially from 1st April 2025. There was an announcement that the 18-20 year old rate will merge with the rate to those aged over 21 in the near term. The announced rates are:
- National Living Wage for over-21s: From £11.44 to £12.21 an hour (+6.7%)
- National Minimum Wage for 18 to 20-year-olds: From £8.60 to £10.00 (+16.3%)
- National Minimum Wage for under-18s: From £6.40 to £7.55 (+18%)
- The Apprentice Rate: From £6.40 to £7.55 (+18%)
Planning point: The increased wage rates will result in some employers (especially those with mainly part time employees) breaching the employer NIC threshold for the first time. We would remind you that you will likely be able to claim the Employment Allowance, which exempts most employers from the first £5,000 of employer NIC per tax year (see below – increasing to £10,500 from April 2025).
Planning point: If you have a significant proportion of staff, it is important to revisit your pricing models in advance of this change to make sure that you can maintain your profit margins.
Increase in Employer National Insurance
From April 2025, the rate of Employer NIC will increase from 13.8% to 15%. Furthermore, the threshold at which this is charged will reduce from £9,100 to £5,500. Please see below about claiming Employment Allowance to mitigate the impact of this increase. This increase will result in an increased cost of around £800 p.a. with an employee paid £25,000 p.a. and around £1,000 additional cost for an employee earning £40,000. The employers who will be hardest hit are those with a larger number of low earning employees (e.g. working few hours per week) as the reduction in the threshold will cost £615 p.a. for an employee earning £9,100 annually.
Planning point: This increase makes the utilisation of salary sacrifice schemes for tax efficient benefits such as employer pension contributions, electric cars and buying extra holiday more attractive.
Increase in Employment Allowance
It was confirmed that the Employment Allowance, which effectively exempts the first £5,000 of Employer’s National Insurance Contributions in each tax year, will be increased from April 2025 to £10,500. From the same date, the £100,000 NIC cap will be removed, meaning that larger employers will now be able to claim the allowance.
Planning point: There remain some qualifying businesses which do not claim the Employment Allowance. There are some qualifying conditions to consider, particularly if you have more than one business, but backdated claims are generally possible, so if you have not claimed this previously, please review your position as soon as possible.
Planning point: A common exclusion is that you are not eligible to claim if the only individual in respect of who Employer NIC is due is also a sole director. You may be able to avoid this restriction by appointing a spouse, civil partner or family member to be a director, though they must be paid at a rate greater than the Secondary NIC threshold (currently £9,100 p.a. but decreasing to £5,500 from April 2025).
Confirmation of Benefits in Kind on company cars and vans – changes to double cap pickups
The Chancellor confirmed no changes to the company car tax rates already announced up to April 2028. Rates will continue to incentivise the take up of electric vehicles:
Appropriate percentages for electric and ultra-low emission cars emitting less than 75g of
CO2 per kilometre will increase by 1 percentage point in 2025-26; a further 1% in 2026-27
and a further 1% in 2027-28 up to a maximum appropriate percentage of 5% for electric
cars and 21% for ultra-low emission cars. For 2028-29 and 2029-30, there will be a 2% rise each year.
Rates for all other vehicles bands will be increased by 1 percentage point for 2025-26 up to
a maximum appropriate percentage of 37% and will then be fixed in 2026-27 and 2027-28. This will increase to 38% in 2028-29 and to 39% in 2029-30 following further increases to all bands of 1% each year for those two years.
Planning point: The appropriate percentage is applied to the car’s list price when new to work out the Benefit in Kind. The employee pays income tax and the employer pays Class 1A NIC on this amount. This will often differ from the actual price paid for the car, so care should be taken when completing P11Ds or indeed taxing through payroll.
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 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits. The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.
Planning point: If you are planning on buying a Double Cab pickup as a company vehicle, it would be worth considering doing so prior to April 2025, though there will be some detail to check on what precisely the Benefit in Kind transitional provisions are to be.
Other Business announcements
Capital Allowances and Annual Investment Allowance (“AIA”) confirmation
In welcome news for businesses, it was confirmed that the rates, bands and capital allowances positions currently in place would not be changed.
This includes the 100% relief under “full expensing” of qualifying assets, the £1M Annual Investment Allowance in the availability of Structure and Buildings Allowance.
The “full expensing” relief remains available only to limited companies, although as AIA is remaining, it is considered rare that a self employed person or partnership will incur over £1M of capital expenditure!
Planning point: The Annual Investment Allowance is now to continue at a level of £1M ongoing, so you can still claim this in priority to “Full expensing relief”. This would still be a rational choice where you have special rate pool assets, since these will attract First Year Allowance at 50% or AIA at 100%.
Personal tax and other announcements
Changes to non-domiciled (“non-dom”) tax rules
From 6th April 2025, a new set of tax rules for “non-doms” will apply, in fact the concept of domicile for taxation is being replaced.
For Inheritance Tax, the test for whether non-UK assets are in scope for IHT will be whether an individual has been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year in which the chargeable event (including death) arises. The time the individual remains in scope after leaving the UK will be shortened where they have only been resident in the UK for between 10 and 19 years.
From 6th April 2025, individuals arriving in the UK (who have not been UK resident in the previous 10 years) will not pay UK tax on foreign income and gains (“FIG”) in their first four years of tax residence in the UK. This income can be remitted to the UK free of tax in that period. Overseas workday relief will continue to be available for the first four years, where employment duties are carried out overseas.
A new Temporary Repatriation Facility (TRF) will be available for individuals who have previously been taxed on the remittance basis. Individuals who have previously claimed the remittance basis and have untaxed FIG will be able to make an election to designate amounts derived from previously untaxed and unremitted FIG that arose prior to 6 April 2025 for a period of 3 tax years, from 6 April 2025. Designated amounts will be charged to tax at a rate of 12% in tax years 2025 to 2026 and 2026 to 2027, with the rate rising to 15% in tax year 2027 to 2028. Any remitted ‘designated amounts’ will not otherwise by charged to UK tax. The TRF will be available provided the individual is UK resident in the relevant tax years.
Existing non-doms who have been resident for less than four years as at 5th April 2025 will benefit from the new treatment until the end of their four-year period, not for a further four years from 2025.
For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 on a disposal where certain conditions are met.
Changes to High Income Child Benefit Charge (“HICBC”)
The significant change announced by previous Chancellor Jeremy Hunt to High Income Child Benefit Charge (“HICBC”) was kept unchanged. Previously, where one partner has income in excess of £50,000, any Child Benefit claimed by them or their partner is recouped as tax at a rate of one percent of the claim for each £100 of income over the £50k threshold, meaning it is totally repayable by the time one partner has income of over £60,000.
Since April 2024, the point at which the reclaim starts rose from £50,000 to £60,000, and the rate at which clawback occurs halved, meaning that entitlement is fully repaid with an income of £80,000 rather than £60,000. However, the announcement previously made by the previous Government that there was a desire to assess this on household income was reversed, and so it is anticipated that the current rules will remain in place.
Planning point: Many people will have opted to not receive Child Benefit rather than have to pay it back. If you have previously made such election, you should review your position with effect from 6th April 2024. Claims can be made via the .gov site here Child Benefit: Make a claim – GOV.UK (www.gov.uk). There is a three-month limit on backdating claims, so make sure you have taken any action by 5th July 2024.
Increase in Capital Gains Tax (CGT) rates and changes to Business Asset Disposal Relief
The much-anticipated CGT increases were that the rates for assets other than residential property are to increase with immediate effect to the same as the rates for disposal of residential property. This means increases for gains falling into the basic rate will be taxed at 18% rather than 10%, and gains falling into the higher rate will be taxed at 24% rather than 20%. Tax rates for gains on residential property remain unchanged.
The availability of Business Asset Disposal Relief will remain at £1M lifetime allowance, with the current rate of 10% for gains within this band applying up to 5th April 2025. From 6th April 2025 this will increase to 14%, and from 6th April 2026 to 18%.
Additional changes to the taxation of “carried interest” by fund managers were announced.
Planning point: A reminder that if you have a CGT liability on a residential property disposal, this must be reported to HMRC and CGT paid within 60 days of completion in most cases. If you need assistance with this process, CRM are happy to assist.
Changes to Inheritance Tax – including pension funds and Business Property Relief
Firstly, the Chancellor announced that the freeze on Inheritance Tax bands, including the property nil rate bands, would remain in place until April 2030 – an extension of two years beyond the announcements made by her predecessors. It was announced that from 6th April 2026, the availability of Business Property Relief (“BPR”) and Agricultural Property Relief (“APR”) at 100%, both of which are currently unlimited, would be restricted to a combined limit of £1M. For assets in excess of £1M, there would be a 50% relief available on the excess amount giving an effective 20% Inheritance Tax charge. For shares which currently benefit from BPR purely due to being unquoted (e.g. AIM portfolios), as opposed to representing this will have a 50% relief but no £1M allowance. We understand that shares in your own business should benefit from the £1M allowance, but we have yet to see how this is defined in draft legislation.3
Planning point: Currently the value of your qualifying business interests would attract 100% BPR on death, including on transfers made within 7 years before death. Where this exceeds £1M, then from April 2026, you may wish to consider whether gifting some shares down the generations and claiming holdover relief for Capital Gains Tax is a good option. Individual circumstances may vary. Remember that assets left to a spouse or civil partner will retain IHT exemption on first death under spousal exemption rules – this applies to all assets.
A significant change was announced to the IHT position of inherited pension funds. Currently, these will generally be outside of an estate for IHT, and so escape charge. If the deceased person died age under 75, then the fund is available to their beneficiaries free of all tax. If they are over 75, it remains exempt from IHT but is charged to income tax on the beneficiaries as drawn (subject to 25% tax free lump sum potentially).
From 6th April 2027, this is to change. Pension funds will now be charged to IHT in the same way as other assets. The proportion of the IHT charge on the estate which relates to the pension may be paid out of the pension fund, which does not trigger any additional tax charge.
However, the fly in the ointment is that the income tax position is unchanged. This means that is someone dies aged over 75, their undrawn pension fund will be potentially subject to IHT (subject to spousal exemption if applicable) but the remainder will also be charged to income tax on the beneficiaries when drawn.
Planning point: For some years, there has been a general position to leave pension fund monies intact and spend other savings first as a way of mitigating IHT charges. From April 2027, this position is likely to reverse for many people, particularly if they are over, or approaching, 75 years old. Of course, it is vital to take proper financial advice before making any decision based on the taxation position, other factors should be considered. Similarly, it would appear that from April 2027 the decision on whether to make a full 25% tax free lump sum withdrawal may require re-appraisal – some people with sufficient headroom in their pension and other savings may wish to take a lump sum and give it away with the hope/expectation of surviving 7 years. Again, it is vital to take proper financial advice before making any decisions.
Increases to Stamp Duty Land Tax (“SDLT”)
It was announced that with immediate effect, the SDLT surcharge for buying a second property, or for buying property through a company, would increase from a 3% surcharge to a 5% surcharge. This is on top of the standard SDLT otherwise payable if the purchase would be your first property or replacing your main home.
What was not announced though was that the current nil rate band extensions will end. From 1st April 2025, for first time buyer’s, the nil rate band will reduce from £425,000 to £300,000. For all other residential purchasers, the nil rate band will reduce from £250,000 to £125,000.
Planning point: These SDLT changes are significant, and may affect timing of purchases in the comping months.
Increase in HMRC debt management and compliance funding
It was unsurprising to hear an increase in funding for HMRC’s debt management activities. On top of previous announcements of increasing spend on compliance activities, a further 5,000 HMRC staff are to employed in compliance activities, with an expectation to collect additional tax revenue of £6.5 bn per year by 2030.
Therefore. we expect tax, VAT and PAYE enquiries to increase for small business clients and non-business taxpayers. The profession is already seeing an increase in enquiry activity from HMRC for the first time post pandemic, with HMRC clearly tasked with increasing the tax take.
Planning point: You can protect yourself and your business from the cost of defending yourself from HMRC enquiries by subscribing to our tax investigation service. The cost for businesses starts at just £150 + VAT per annum. Please get in touch with your usual contact at CRM if you would like to find out more about this service.
Please note that this is designed as a generic guide rather than specific advice. As always, it is impossible to include every nuance in a publication such as this, so if you have a question about how a given measure may affect you or your business, or if you have a general tax query, please get in touch with us on 01865 379272.
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