Home / Latest News And Updates / Top 10 highlights for accountants from Autumn Budget 2024
04 Nov 2024
Rachel Reeves, the Chancellor of the Exchequer, delivered the first Budget speech of the new Labour government on 30 October 2024. The Budget included many "difficult" choices as she sought to fill a £22 billion 'black hole' in the public finances while restoring economic stability and growing the UK economy.
On the whole, the Budget lived up to Labour's manifesto promises to avoid raising taxes on workers. However, what was good news for workers proved to be less so for businesses, with significant increases to employers national insurance as well as uplifts to minimum wage rates. These tax and employment cost increases could be painful for businesses, particularly those who have already been struggling to meet the steep increases in minimum wage over the last couple of years.
Below is a summary of the top highlights from the Budget together with our thoughts on what UK accountants should be considering when advising clients and helping them plan for the changes brought about by Autumn Budget 2024.
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From 30th October 2024, the day of the Budget, capital gains tax rates were increased for assets other than residential property and qualifying business disposals. Basic rate taxpayers will now pay 18% (increased from 10%), while higher rate taxpayers face a 24% rate (increased from 20%).
Business Asset Disposal Relief is still available, but the capital gains tax rate under this relief will rise to 14% in 2025/26 and again to 18% in 2026/27.
Clearly, it's too late now to take advantage of the lower rates that applied before Autumn Budget 2024. However, if you have clients that have been planning to dispose of assets that are not residential property or businesses, you should make them aware of the additional tax they will now pay. This may help them to decide whether disposing of the asset is still their best course of action.
When it comes to business disposals though there is still an opportunity to plan the timing of a business sale so as to take advantage of the lower Business Asset Disposal Relief rates.
The Autumn Budget brought some changes to stamp duty land tax with immediate effect. Where someone buys an additional dwelling when they already own one, a stamp duty surcharge is added to the SDLT payable. Previously this was 3%. However, for acquisitions on or after 31 October 2024 the stamp duty surcharge rate has now been increased to 5% above the standard residential rates.
Companies and non-natural persons (e.g. trusts) buying residential property for more than £500,000 now pay a rate of 17% instead of 15%.
If you have clients that invest in property or own multiple properties, you should alert them to the increased costs they now face in acquiring additional properties. This may help them to determine their future investment strategies in the housing market.
Autumn Budget 2024 confirmed that starting from the school term beginning in January 2025, private school fees, which have been exempt from VAT, will be made subject to 20% VAT. The VAT charge will apply to education, training, and boarding services.
In addition, private schools with charitable status will lose their eligibility to business rates charitable rate relief from April 2025.
This significant change almost certainly means that families with children in private schools will face higher costs, as schools are unlikely to be unable to absorb the VAT as an additional cost. Parents may also find that there are reductions in the quality of education if schools decide to try and cut some costs to keep their fees competitive.
Private schools themselves may experience financial pressures, and will also need to get used to the new administrative and compliance aspects of being VAT registered.
If you advise private schools, they will likely appreciate input on how to register for VAT as well as how to set up their accounting records to deal with VAT efficiently. One-to-one training may also be helpful to bursary staff.
If you are looking after private clients who have children attending private schools then it will be important to consider the impact this change is likely to have on their disposable income and they may want help reviewing their future education funding strategies.
The employer national insurance contributions rate will rise from 13.8% to 15% as of 6th April 2025. Simultaneously, the threshold at which an employer starts to pay national insurance contributions on each employee's salary is being lowered from £9,100 to £5,000.
The Chancellor estimates that this measure will raise £25 billion per year by the end of the forecast period.
To offset the impact on smaller UK businesses, the employment allowance will be increased from £5,000 to £10,500. However, interestingly the restriction that employers national insurance contributions must not exceed £100,000 in the previous tax year is being removed. This means many more (larger) UK businesses will be able to benefit from the employment allowance.
You should assess the overall impact on payroll costs of this national insurance increase. Clients with limited headcounts and those already benefiting from the Employment Allowance may particularly appreciate being helped to understand and cost out how these increases will affect their particular situation and how they budget for hiring new staff.
Profit extraction strategies will also need reviewing, which may not be easy and likely need to be looked at on a client by client basis.
Currently, it is common for director-shareholders to draw a small salary at the secondary threshold level to maintain state benefit entitlements and draw dividends for the remainder. However, with the secondary threshold dropping below the lower earnings limit this strategy will need reconsidering. Clients may need to choose between maintaining state benefit entitlement and paying the minimum amount of income tax and national insurance possible. Don't forget to factor the effect of corporation tax relief, where the effective rate could be variable, into these calculations.
Inheritance tax thresholds for the nil-rate band (£325,000) and residence nil-rate band limit (£175,000) will remain frozen until 2030. This means where a married couple or civil partners' estate is valued below £1 million they will generally not pay inheritance tax. The residence nil-rate band continues to be tapered for estates that are valued above £2 million.
Although it was widely speculated prior to the Autumn Budget, there was no increase for 2025/26 in the inheritance tax rates for estates (40%) or chargeable lifetime transfers (20%). The reduced rate of 36% for estates leaving 10% or more to charity will also continue to apply in 2025/26.
However, the government is proposing to apply limits to Business Property Relief and Agricultural Property Relief. Currently, for qualifying assets, there is a 100% relief with no financial limit. However the Autumn Budget stated the intention to change this from 6 April 2026 so that 100% relief will only apply to the first £1 million, with the relief reducing to 50% on the value that exceeds £1 million. It is important to note that the £1 million allowance is a combined one, so for estates with both qualifying business and agricultural assets there is only the single £1 million allowance available for use.
Additionally, Budget 2024 proposes that shares that are designated as "not listed" on the markets of recognised stock exchanges, such as AIM, will get 50% (not 100%) relief in "all circumstances".
Currently unused pension funds do not come into inheritance tax calculations. However, from April 2027 the government is proposing to make an individual's undrawn pension, as well as death benefits, part of the value of their estate for inheritance tax purposes. Pension scheme administrators will become responsible for reporting and paying any inheritance tax that is due on pensions.
While the rates not going up is good news, the freeze means that an increasing number of estates will be pulled into paying inheritance tax over the next few years. Also, bringing unused pension funds into the equation may mean that you will have more clients with estates of a value that are now likely to trouble the inheritance tax thresholds.
For farmers and others with significant agricultural or business assets, the proposed changes will need carefully considering. For example, it may be worth assessing now whether there are ways to distribute assets between husbands and wives so that the effect of this change is minimised.
For the 2025/26 tax year, retail, hospitality and leisure (RHL) businesses will benefit from a business rates relief of 40%, subject to a £110,000 cap per business. The small business tax multipler, which is used on properties with a rateable value of less than £51,000, is also being frozen next year.
The government has said that they intend to look at longer term measures to permanently lower tax rates for RHL properties with a rateable value under £500,000 from 2026-27. The biggest cuts are planned for properties that currently pay the small business multiplier. The tax cut will be funded by introducing higher multipliers for properties with a rateable value of £500,000 and above, which will mean that large distribution warehouses, such as those used by online giant businesses, will be playing a role in supporting high street businesses.
If you work with clients in the RHL sectors, and for all small business clients, you should check that they are benefiting from lower business rates. Councils can be very slow when it comes to adjusting business rates and it should not be assumed that they get calculations correct. These reliefs could provide your clients with savings that are significant to them so make it a practice to review their business rates.
As of 1st April 2025, the national living wage for those aged 21 and over will rise to £12.21 per hour, this is a 6.7% increase.
Bigger rates of increase were seen in the wage rates for younger workers, with 18-20 year olds due to be paid £10.00 an hour, and 16-17 year olds and apprentices due to be paid £7.55. This is a step towards Labour's intention for all workers to receive the same minimum wage rate.
Increases to the national living wage and minimum wage over the last two years have been significant and many businesses have found these extra employment costs a struggle. Further increases will strain these businesses further.
Employers will need to look at affordability carefully when planning their headcount, so you could have a role in helping them to budget and review their staff costs and then adjusting payroll strategies accordingly.
From 6th April 2025, the Autumn Budget 2024 confirmed that the non dom tax regime as we have known it will disappear and be replaced with a new residence based scheme. The concept of 'domicile' will disappear from tax legislation from April 2025 and anyone who is currently 'non-domiciled' will lose their remittance basis tax advantages.
A new temporary repatriation facility will be available for individuals that have been claiming the remittance basis.
There will also be a 100% relief from tax on foreign income and/or capital gains available to individuals in their first 4 years of UK tax residence. However, a 'newly arrived' individual who claims this relief will lose the UK personal allowance and CGT annual exemption, as well as their ability to claim relief for some foreign losses.
Where you have clients that are currently non-domiciled, you should review how these changes will affect them and how they can make best use of the temporary repatriation facility to limit the income tax they will pay.
You may also want to talk with your non-resident clients to review their residency and tax strategies, particularly those who hold assets abroad or are considering repatriation.
There were no changes to the income tax framework, with the rates for income tax, employee's national insurance or class 4 national insurance staying the same as they were for 2024/25. The income tax and national insurance thresholds also remain largely unchanged.
The Chancellor announced that the freeze on thresholds brought in by the previous government will end with the 2027-28 tax year and from 2028-29 personal tax thresholds will be uprated in line with inflation once again.
While this technically means that the government has fulfilled its manifesto promise of no tax rises for workers, in real terms 'fiscal drag' means that more will be brought into higher rate taxes before the thresholds begin to increase again.
Especially for those approaching higher rates of tax, you should review their tax situation with them. Adjustments to remuneration strategies may help some to stay out of higher rates without losing out financially.
Corporation tax rates and thresholds all remain the same for the 2025/26 financial year.
The Budget included the publishing of a corporate tax roadmap with a view to creating a stable and predictable tax environment for corporate businesses.
The roadmap included commitments to not increase corporation tax rates beyond their current amounts for this parliament, i.e. until 2028/29. This includes keeping the small profits rate and marginal relief.
The 'full-expensing' regime will stay and so will the annual investment allowance. The current rates of Research and Development (R&D) tax credits will also stay.
It had been expected that the budget would drop the small profits rate and marginal relief, however this did not materialise. This means you will need to continue factoring these into tax advice you give companies. Remember too that the thresholds are shared equally between companies in a group or that are controlled by the same person or persons. This can lead to higher than necessary effective rates of corporation tax where an associated company with only limited activity has to be included.
The budget also included information about HMRC's approach to 'non-compliance' in R&D claims. It is clear that they have increased their focus on this with 17% of claims received in 2023/24 being given a compliance check. Therefore, you should be clear about the rules and offer timely advice to clients about claims they wish to make.
These were not the only changes announced in the budget. It was also announced that HMRC will be hiring 5,000 additional compliance officers and will be investing in modernising their IT systems. So, we may need to expect increased scrutiny in tax compliance areas. Carried interest, the audio visual expenditure credit, making tax digital and fuel duty were also covered in the budget.
However, this summary hopefully provides you with a starting point for understanding and preparing for the significant changes presented in the Autumn Budget 2024. As you proactively engage with your clients, undertake strategic tax planning for them and provide them with informed financial advice, we are confident that your practice will continue to grow and thrive!
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