understanding the uk autumn budget 2024
key tax changes and their implications
the uk autumn budget 2024, delivered by the new labour government, has introduced a series of significant tax changes that will impact both businesses and individuals. these measures are part of a broader package aimed at addressing fiscal stability and generating additional revenue. here is a detailed look at the key announcements and how they might affect your financial planning.
increased employer national insurance contributions
one of the most substantial changes is the increase in employer national insurance contributions (nics). from april 2025, the rate of employer nics will rise by 1.2 percentage points to 15 per cent. additionally, the threshold at which employers start paying nics on a worker’s earnings will be reduced from £9,100 to £5,000 per year. this change is expected to raise an additional £25 billion in tax revenue by 2029 to 2030.
however, to mitigate the impact on smaller businesses, the employment allowance will be increased from £5,000 to £10,500, and the £100,000 threshold for claiming this allowance will be removed. this adjustment aims to take smaller employers out of nics altogether, providing them with much-needed relief.
no change to corporation tax
despite the various tax increases, there are no major changes to corporation tax. the chancellor has confirmed that the main rate will remain at 25 per cent for the life of the current parliament. the small profits rate and marginal relief will also be maintained at current rates and thresholds. features such as full expensing, the annual investment allowance, research and development relief rates, and the patent box will continue unchanged.
changes to capital gains tax
the autumn budget has introduced significant changes to capital gains tax (cgt) rates. the lower and higher main rates of cgt will increase from 10 per cent and 20 per cent to 18 per cent and 24 per cent respectively for disposals made on or after 30 october 2024. these new rates apply to assets other than residential property and carried interest.
for business asset disposal relief and investors’ relief, the cgt rate will increase from 10 per cent to 14 per cent from 6 april 2025, and then to 18 per cent from 6 april 2026. these changes, along with other adjustments, are expected to raise almost £2.5 billion in additional tax each year.
taxation of carried interest
carried interest, which is typically associated with private equity and hedge funds, will see a significant tax hike. from april 2025, the cgt rate on carried interest will increase from 28 per cent to 32 per cent. furthermore, from april 2026, carried interest will be taxed fully within the income tax framework, although bespoke rules will be introduced to reflect its unique characteristics.
inheritance tax reforms
several changes have been announced to inheritance tax. the thresholds for inheritance tax will remain frozen until april 2030. additionally, from april 2026, agricultural property relief and business property relief will be restricted. full relief will be available only for the first £1 million of combined agricultural and business assets, with a 50 per cent relief for amounts above this threshold. the rate of business property relief for shares not listed on recognised stock exchanges will also be reduced to 50 per cent.
income tax thresholds
in a welcome move for individuals, the freeze on income tax thresholds introduced by the previous government will not be extended beyond april 2028. from this date, personal tax thresholds will be uprated in line with inflation, providing some relief to taxpayers.
other key changes
business rates: there will be two permanent lower rates of business rates for retail, hospitality, and leisure businesses. additionally, a 40 per cent relief will be available for 2025 to 2026, capped at £110,000 per business.
late payment interest rate: the late payment interest rate charged by hm revenue and customs (hmrc) on unpaid tax liabilities will increase by 1.5 per cent from 6 april 2025.
employee ownership trusts and employee benefit trusts: the government will introduce a package of reforms to the taxation of these trusts, effective from 30 october 2024.
implications for businesses and individuals
the autumn budget 2024 introduces a mix of tax increases and relief measures that will have varying impacts on different sectors.
employers: the increase in employer nics and the reduction in the nics threshold will significantly increase labour costs, particularly for larger employers. however, smaller businesses will benefit from the increased employment allowance.
business owners: the changes to capital gains tax and inheritance tax, especially the restrictions on business property relief and agricultural property relief, may prompt business owners to reconsider their succession planning and asset structures.
individuals: the increase in capital gains tax rates and the changes to carried interest taxation may influence investment decisions. the uprating of income tax thresholds from april 2028 will provide some relief to taxpayers.
in conclusion, the uk autumn budget 2024 marks a significant shift in tax policy, with a focus on increasing revenue while providing some relief to smaller businesses and individuals. it is crucial for businesses and individuals to understand these changes and plan accordingly to mitigate any adverse effects and maximise the benefits of the new tax landscape.
at cutts and co accountancy, we are committed to helping our clients navigate these changes and ensure they are well-prepared for the upcoming tax year. if you have any questions or need guidance on how these measures will affect your specific situation, please do not hesitate to contact us.
