Autumn Budget 2024: Were promises fulfilled or broken?

National Insurance Contributions

This takes us to the single largest tax raising measure, the changes to Employers’ National Insurance Contributions.  Not only will the rate increase from 13.8% to 15% from April 2025, but the threshold above which contributions are payable will decrease from £9,100 to £5,000.

Over recent weeks this rate increase has been the subject of both great ‘speculation’ and significant debate about whether it would be in breach of a manifesto promise not to increase taxes on working people.  Clearly significant funds are needed to pay for the government’s agenda, but it is hard to argue that the change is not a tax on working people – directly on owner managers but also by putting salary increases at risk and by the risk of price rises as employers seek to maintain margins.

But the money had to come from somewhere and the big fund-raising taxes are those that Labour promised not to increase.  Hard choices indeed.

Inheritance tax and capital gains tax

Capital taxes, inheritance tax (IHT) and capital gains tax (CGT), have also been the subject of great debate since the election.

Initial talk of equalising CGT with income tax proved wide of the mark with the higher rate ‘only’ increasing from 20% to 24% for gains on or after 30 October 2024.  The lower rate increases much more significantly from 10% to 18%, meaning that it is almost the same as the basic rate of income tax.  These changes seem particularly odd as we have returned to having the same rate of tax for all gains, including second homes, which flies in the face of the recent policy of taxing gains on second homes at a higher rate.

Business owners will be relieved to know that Business Asset Disposal Relief remains, giving a 10% rate of tax for now, but rising to 18%, on lifetime gains up to £1m. However, there was bad news for the fund management industry with carried interest CGT being subject to a significant increase, to 32% from April 2025. The position worsens from April 2026, when all carried interest will fall within the income tax and national insurance regimes, albeit with a 'discount' for certain qualifying amounts.

IHT thresholds remain frozen at £325,000, or in some circumstances £500,000 including your home, until 2030 and the rate remains at 40%.  But there will be significant changes to bring pension pots into the IHT net from April 2027 and to restrict agricultural and business property reliefs (APR and BPR).

Currently BPR and APR can each provide unlimited 100% relief from IHT.  From April 2026 there will be a combined limit of £1m for 100% BPR and APR, qualifying assets over that limit will only attract 50% relief.  AIM listed shares will also attract 50% relief from IHT.

Private schools

Unsurprisingly, the previously announced imposition of VAT on private school fees and the removal of business rates relief will take place in January and April 2025.  However, there are increased carve outs from the VAT charge for English as a foreign language schools and greater clarity surrounding nurseries.

Read more here.

Corporation tax

The government’s Corporate Tax Roadmap has been published committing to capping the rate of corporation tax at 25%, maintaining full expensing and the £1m Annual Investment Allowance and preserving the R&D tax reliefs.

This is an area of welcome stability, although there had been hope of a more generous R&D regime.

Income tax

No changes were announced to rates or thresholds, meaning that fiscal drag will continue to cause more people to pay income tax over time until the thresholds increase in April 2028.

Non-domicile regime

As expected, the UK’s non-domicile tax regime will be abolished from April 2025, being replaced by a new regime for temporary residence.  There will be winners and losers from these changes, with those arriving in the UK having the greatest opportunity to benefit and the clear losers being currently non-domiciled individuals with offshore trusts and/or non-UK property that will be significantly more likely to be subject to IHT.

Wealthy ‘non-doms’ will need to carefully consider their residence position in light of these changes and the risk of their estates becoming subject to IHT.

Stamp Duty Land Tax

The surcharge for ‘second’ properties will increase to 5% from 31 October 2024.

Tax avoidance

As has been the case for many years, the Chancellor sees an opportunity to raise significant amounts by tackling tax avoidance and non-compliance.

Measures will be introduced to further clamp down on ‘umbrella companies’ and the promoters of tax avoidance schemes, while there will be investment in HMRC to improve systems, increase efficiency and tackle late payment and non-compliance.

Sadly, we seem no closer to accessing the benefits that would accrue from simplifying the tax system.

Summary

This was a momentous Budget, raising huge amounts through tax increases and by changing the government’s borrowing rules and setting out an ambitious investment agenda to create the foundations from which the government’s growth plans can flower.  But as the Chancellor said, ‘change must be felt’.

The test will be whether the money can be spent wisely, in ways that deliver the mission of economic growth and improved lives for everyone.  If change can be felt over the coming years Rishi Sunak’s claim of ‘broken promise after broken promise’ will be forgotten, if not it may haunt the government.

Get in touch

If you would like advice or clarity on how any of the changes announced might impact you or your organisation, fill in the form below and we will be in touch shortly.