On 30 October 2024, Chancellor Rachel Reeves delivered the Autumn Budget, introducing significant changes that will impact businesses and individuals alike. As your trusted accountancy practice, we have analysed the key aspects of this budget to provide you with a comprehensive overview.
Taxation Changes
- Employers’ National Insurance Contributions (NICs): From April 2025 the rate for employers’ NICs will increase from 13.8% to 15%, and the threshold will decrease from £9,100 to £5,000. This change is expected to raise £25 billion annually for public finances. To ensure that small and micro employers are not adversely affected the Employment Allowance will increase from £5,000 to £10,500.
- Inheritance Tax (IHT): From April 2026, a combined £1 million allowance will permit 100% relief on qualifying agricultural and business assets up to this threshold; assets exceeding £1 million will receive 50% relief, resulting in a 20% effective inheritance tax rate on the excess value. Additionally, shares not listed on recognised stock exchanges, such as those on the Alternative Investment Market (AIM), will see their BPR reduced from 100% to 50%, subjecting them to a 20% inheritance tax rate.
- Capital Allowances: The 100% First Year Allowances (FYAs) for zero-emission cars and electric vehicle charging points will now be available until 31 March 2026 for Corporation Tax and 5 April 2026 for Income Tax. Also, starting in April 2025, double cab pickup trucks with a payload of one tonne or more will be classified as cars for capital allowances purposes.
- Capital Gains tax: The Autumn Budget 2024 introduces higher Capital Gains Tax (CGT) rates, with basic-rate taxpayers now paying 18% (up from 10%) and higher-rate taxpayers paying 24% (up from 20%) on most assets, effective from 30 October 2024. For Business Asset Disposal Relief (BADR) and Investors’ Relief, qualifying gains will see an increase to 14% from April 2025 and 18% from April 2026. Additionally, carried interest for private equity managers will be taxed at 32% starting April 2025, aligning with international standards.
Wage and Employment Adjustments
- National Minimum Wage: The minimum wage is set to increase by 6.7%, reaching £12.21 per hour.
- Employment Rights: The government has implemented significant reforms to employment regulations, including immediate protection against unfair dismissal and the entitlement for employees to request flexible working arrangements, unless the employer can demonstrate that such arrangements are impractical.
- Car and van benefit: new rates are set for company car benefits and van benefits as well as the fuel charge for fossil-fuelled cars and vans. There are to be some changes made to close loopholes in contrived car ownership schemes. Double cab pick-ups will be reclassified as cars from April 2025. There was uproar when HMRC tried to make this change earlier in 2024.
Economic Outlook
The Office for Budget Responsibility (OBR) forecasts real GDP growth of 1.1% in 2024, with gradual increases in subsequent years. The budget aims to stabilize the economy and enhance public services, but success remains uncertain due to sustained scepticism.
Recommendations
- Review Payroll Processes: Ensure that payroll systems are updated to reflect the new NICs rates and minimum wage adjustments. For those of out clients we are administering the payroll for, we will inform you of any required changes.
- Assess Employment Contracts: Evaluate employment contracts and policies to align with the new employment rights regulations.
- Evaluate Capital Gains Tax (CGT) Implications: The rise in CGT rates necessitates a reassessment of asset disposal plans. Utilizing annual allowances and considering tax-efficient investment vehicles, such as Individual Savings Accounts (ISAs), can optimize tax positions.
- Adjust Business Structures: The reduction in Business Property Relief (BPR) from 100% to 50% for certain assets, including shares on the Alternative Investment Market (AIM), effective April 2026, may affect succession planning. Reevaluating business structures and considering alternative ownership models, such as Employee Ownership Trusts (EOTs), can provide tax advantages.
The content provided in this article is intended as a brief summary of the most relevant points from the Autumn Budget 2024, tailored to the interests of our clients. While we have highlighted key changes that may impact businesses and individuals, this summary is not exhaustive and is not to be interpreted as legal advice. We recommend reviewing the full budget to understand all implications and legislative details.
We are committed to assisting you in navigating these changes. Please contact us to discuss how the Autumn Budget 2024 may affect your business and to develop strategies tailored to your needs.