The 2024 Budget Update had largely been framed as a Budget of change following Labour’s manifesto, “Our plan to change Britain”, and Rachel Reeves, Chancellor of the Exchequer, did just that.
From the outset of the Budget, the Chancellor said the Budget will raise over £40 Billion in taxes whilst not raising taxes for “working people”.
We will be providing a more in-depth analysis of the 2024 Budget tax changes and how they may affect you as the details emerge, but please see below our summary of the Headline Tax Changes. Please Book Time with Farnell Clarke Tax if you would like to have a one-to-one meeting with Farnell Clarke’s tax experts to discuss how the 2024 Budget might affect you.
Employer’s National Insurance
Labour insisted on not raising taxes for the “working person” and have instead announced a raise to Employer’s National Insurance Contributions (NICs) from 13.8% to 15%.
Additional changes were announced with the reduction of the Secondary Threshold, the amount over which the 15% NICs are due on a worker’s earnings, from £9,100 to £5,000.
Although there was an increase in NIC for employers, there was good news for Small Businesses with the Employment Allowance increasing from £5,000 to £10,500. This Employment Allowance allows eligible businesses to reduce their annual National Insurance liability.
Capital Gains Tax
Changes to Capital Gains Tax (CGT) were widely expected in the lead up to Budget 2024. The Chancellor announced that CGT rates for Basic and Higher Rate taxpayers would increase for disposals on or after 30 October 2024 as follows:
- Current Rates Announced Rates
- Basic Rate Taxpayer 10% 18%
- Higher Rate Taxpayer 20% 24%
This aligns the CGT Rates on investments and other assets to those that are currently applied to Residential Property. Herking back to CGT Rates of 2015/16.
Business Asset Disposal Relief
Further changes for CGT were announced for Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs Relief. Currently entrepreneurs can benefit from the
lower rate of CGT of 10% on gains up to £1 million arising from the sale of their business and assets associated therewith. The Chancellor announced this rate will be increased to 14% from April 2025 and further increased to 18% from April 2026.
Inheritance Tax
There is speculation before every Budget that there will be changes to Inheritance Tax (IHT) often without fruitage; but for once there have been significant changes to IHT.
The Chancellor announced that Inherited Pension funds will be brought within charge of IHT.
More significantly, changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) were announced. These reliefs have proved vital for many family businesses and farmers alike over the years. However, the Chancellor announced that 100% APR & BPR will be limited to £1 million. With the value of APR & BPR assets more than these thresholds only benefiting from 50% relief; bringing the effective IHT rate on these assets to 20%.
The Freeze on the Nil Rate Band (NRB) and Residential Nil Rate Band (RNRB) has been extended to 2030, keeping these at £325,000 and £175,000 respectively.
Corporation Tax
As part of Budget 2024, the government has published it Corporation Tax Roadmap to provide stability to the businesses. This roadmap includes commitments to cap the headline rate of Corporation Tax at 25% and to preserve R&D tax reliefs.
Stamp Duty Land Tax
The Chancellor announced that for completions from 31 October 2024, the Stamp Duty Land Tax (SDLT) surcharge for purchases of a second property will be increased from 3% to 5%. This may prove to be a significant additional cost to property owners.
VAT on Private School Tuition Fees
As has been widely expected, the chancellor announced that VAT will be applied to Private School Tuition Fees. This will take effect from 1 January 2025. It is therefore more important than ever to consider your tax planning requirements to make funding School Fees for your family as tax efficient as possible.
Income Tax
The freeze to Income Tax Allowances and Thresholds will come to an end. From April 2028, Income Tax Allowances and Thresholds will increase in line with inflation.
Domicile
The long-standing concept of domicile for UK tax has been replaced with a system based on tax residence. A new 4-year foreign income and gains regime has been introduced for new arrivals who have not been UK tax resident in the previous 10 years.
Individuals previously taxed on the remittance basis will be able to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility.
