Autumn Budget 2024

On the 30^th October, The Chancellor, Rachel Reeves, delivered her Autumn Budget to Parliament which is set to result in £40 billion in tax rises to “restore financial stability” however business owners and employers will take the biggest hit.

We’ve broken down the main tax changes announced in the Autumn budget into the following sections:

Inheritance tax

• The IHT threshold of £325k will remain until 2030.
• From April 2027, inherited pensions will be subject to IHT. Pension scheme administrators will be liable for reporting and paying any IHT due on pensions to HMRC and income tax will still be payable by beneficiaries when withdrawing funds from the pension fund. Pensions will therefore remain a tax efficient way of saving for your own retirement but not for succession of wealth.
• From April 2026, agricultural property relief and business property relief will be reformed, with the highest rate of relief remaining at 100% for the first £1m of combined eligible business and agricultural assets on top of the existing nil-rate bands. The rate of relief will reduce to 50% after the first £1m. It will therefore be important for those with qualifying assets in excess of the £1m threshold to decide whether to make gifts (the gift would be a potentially exempt transfer and free from IHT providing the donor survived 7 years from the date of the gift).
• It’s also important to note that the £1m threshold for APR and BPR is not transferable between spouses. Spouses may therefore consider transferring the first £1m of qualifying assets into a trust on their death to crystalise their £1m limit whilst ensuring the assets remain out of the estate of the remaining spouse.
• Offshore trusts will no longer be able to shelter assets from IHT, and there will be transitional arrangements for people who have made plans based on current rules.

Capital gains tax

• CGT rates will increase from 10% to 18% for basic rate taxpayers, and from 20% to 24% for higher rate taxpayers, matching existing rates for property which stay the same. Rates on chargeable gains from selling additional property remain unchanged at 18% and 24%, respectively.
• Business asset disposal relief will remain at 10%, before rising to 14% on 6 April 2025, and 18% from 6 April 2026.
• Care should be taken with elections under s.169Q (BADR election to realise gains now rather than when loan notes are crystalised. The rate to be applied will be the rate on the date the election is made.
• The tax treatment of carried interest will be reformed by increasing CGT rates on carried interest to 32% and then, from April 2026, moving to a revised regime.

Stamp duty land tax

• The higher rate for additional dwellings surcharge of SDLT in England and Northern Ireland will rise from 3% to 5%, from 31 October 2024.

Value added tax

• The standard rate of VAT will remain at 20%.
• VAT at the standard rate will be added to private school fees and boarding services from 1 January 2025.

Income tax and National Insurance

• The income tax and NIC thresholds in England and Wales will remain frozen until the end of 2027–28, when they will begin to rise in line with inflation.
• Rates of income tax and NICs paid by employees will remain unchanged.
• Employers will pay national insurance contributions (NIC) on an employee’s earnings above £5,000 at the rate of 15%.
• Currently, employers pay secondary class 1 NIC at the rate of 13.8% on the amount by which an employee’s earnings exceed the secondary threshold (ST) of £9,100 per year.
• The employment allowance will be increased to £10,500 (from £5,000) per year to help smaller businesses.
• The upper secondary threshold (UST) remains unchanged (higher) in the case of investment zones and freeports, and under 21s, veterans and apprentices under 25.

Corporation tax

• The main rate of corporation tax paid by businesses on taxable profits over £250k will stay at 25% until the next election.

Employee Ownership Trusts

There is draft legislation which will have effect from 30/10/2024 to bring in changes to the CGT relief conditions when shares are sold to an EOT. The changes will:

• Ensure that former owners cannot retain control of the company post-sale by retaining control of the Employee Ownership Trust.
• Require that the trustees of a qualifying Employee Ownership Trust be UK resident as a single body of persons.
• Require that reasonable steps are taken to ensure that the consideration paid on disposal of shares to the trustees does not exceed market value.
• Also increases the time period for which the CGT relief can be withdrawn to four years.

Non-Dom regime

A new residence-based regime will replace the current non-dom regime from 6 April 2025.

The key features include:

1. Introducing a new 4-year foreign income and gains (FIG) regime for new arrivals who have not been UK tax resident in the previous 10 years.
2. Allowing individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility
3. Reforming Overseas Workday Relief
4. Replacing the domicile-based system, for inheritance tax with a residence-based system.

Temporary Repatriation Facility

• Individuals who have previously claimed the remittance basis will be able to access a new Temporary Repatriation Facility (“TRF”) enabling them to designate and remit foreign income and gains that arose prior to 6 April 2025 at a reduced rate.
• The TRF charge will be payable on the designation, but once a designation has been made, no further UK tax will be payable, regardless of the tax year of remittance.
• The TRF will only be available for a limited period of three tax years, from 6 April 2025.
• Remittances made via the TRF will be taxed at 12% for tax years 2025/26 and 2026/27, and 15% for tax year 2027/28.

Other commitments – the Government has also committed to:

1. Maintaining the current capital allowances system (including permanent full expensing and the £1m AIA);
2. Maintaining the current R&D reliefs; and
3. Developing a new process for increasing tax certainty in advance for major investments.

The HMRC policy paper: Autumn Budget 2024 – Overview of tax legislation and rates (OOTLAR) sets out the detail of each tax policy measure announced at Autumn Budget 2024 and of previously announced measures that will be included in Finance Bill 2024–25.

If you would like any further information on the changes announced in the budget, please do not hesitate to get in contact with a member of the team.

Disclaimer: This article is for general information only and is not intended to constitute individual advice. It is recommended that you seek independent tax advice before taking steps to structure your succession planning.