Tax E-News – Autumn Budget 2024

On 30 October 2024, Chancellor Rachel Reeves presented her first budget to parliament. This was a budget intended to restore stability to our economy and to begin a decade of national renewal. Investment will be funded by revised debt rules to facilitate additional borrowing and a hefty £40 billion of tax rises.

Headlines included:

• Immediate increases to capital gains tax rates with further uplifts in relation to some business disposals from both April 2025 and April 2026.
• Immediate increases to Stamp Duty Land Tax, including for those buying residential property when they already own at least one dwelling.
• Confirmation that 20% VAT will apply to private school fees for the school term beginning in January 2025.
• Increased costs for many employers from April 2025 through both increases to the national minimum wage and significant reforms to employers’ national insurance contributions.
• Another change in approach for businesses utilising double-cab pick up vehicles, coming into effect in April 2025.
• Plans to restrict inheritance tax agricultural and business property reliefs from April 2026.
• Plans to include an individual’s undrawn pension fund in their inheritance tax estate from April 2027.

Below, we talk more about the Budget and what it means for you.

INCOME TAX

Please note that ‘tax years’ run to 5 April each year and that, for example, 2025/26 signifies the year to 5 April 2026.

Your personal allowance

Your tax-free personal allowance will remain at £12,570 in 2025/26. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.

Income tax rates and allowances

For 2025/26, income tax rates and thresholds remain frozen at their 2024/25 levels.

After your tax-free ‘personal allowance’ has been deducted, your remaining income will be taxed in bands in 2025/26 as follows: [Chart...]

‘Other income’ means income other than from savings or dividends. This includes salaries, bonuses, profits made by a sole trader or a partner in a business, rental income, pension income and anything else that is not exempt.

Scottish taxpayers

If your main residence is in Scotland or you are otherwise classed as a ‘Scottish taxpayer’, the application of income tax rates and bands applies differently where ‘other income’ is concerned. After the ‘personal allowance’ has been deducted, your ‘other income’ is taxed in bands as follows: [Chart…]

The rates for 2025/26 are expected to be announced at the Scottish Budget, on 4 December 2024.

Welsh taxpayers

Similarly, you pay Welsh income tax if you live in Wales. The rates set by the Welsh government usually shadow the main UK income tax rates and allowances and this was the case for 2024/25. We expect the 2025/26 rates to be confirmed when the Welsh Budget is published on 10 December 2024.

Tax on savings income

A savings allowance determines how much savings income you can receive at 0% taxation, instead of the usual tax rates for savings income as shown above. This will remain at the 2024/25 level of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

Interest income from an Individual Savings Account (ISA) continues to be exempt from tax.

Tax on dividend income

A dividend allowance determines how much dividend income you can receive at 0% taxation, instead of the usual tax rates for dividend income as shown above. This will remain at the 2024/25 level of £500.

Dividend income from a ‘stocks and shares’ ISA continues to be exempt from tax.

Individual Savings Accounts (ISAs)

The limit on how much you can save into ISAs (including cash and stocks and shares ISAs) in 2025/26 remains at £20,000 overall. This includes up to £4,000 that can be saved into a Lifetime ISA. The Junior ISA and the Child Trust Fund limit both remain at £9,000. These ISA limits are now fixed until 2030. […]

The High-Income Child Benefit charge (HICBC)

You may have to pay the HICBC if you are considered to have ‘high income’ and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child.  […]

CAPITAL GAINS TAX

As expected, and with immediate effect from the budget date of 30 October 2024, the rates of capital gains tax (CGT) have been increased on some asset types as follows: [Chart…]

Entrepreneurs will be pleased to learn that Business Asset Disposal Relief (BADR) will continue to apply when they dispose of their business. However, the rate of CGT on BADR qualifying disposals is increasing from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.  These rates apply to the first £1 million of qualifying disposals.

NATIONAL LIVING WAGE (NLW) AND NATIONAL MINIMUM WAGE (NMW)

Employers must pay their employees at least the NLW, for workers aged 21 and over, or the NMW otherwise. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice. [Chart…]

The percentage increases for the 18-20 year old rate (16.3%) and the 16-17 year old and apprentice rate (18.0%) are significant. This is a step towards Labour’s ambitions for all adults to receive the same minimum wage. While this is good news for workers, employers will need to carefully consider affordability when planning their headcount for the year ahead.

EMPLOYMENT TAXES

For Employees

The national insurance contributions (NICs) rates and annual thresholds for employees for 2025/26 are as follows: [Chart…]

For Employers

The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025: […]

This increase in employers’ NICs is undoubtedly a blow to some businesses and, indirectly, employees. Combined with the increases in the NMW and potential costs associated with reforms in employment law, these measures will stretch employer wage budgets and potentially lead to slower growth in some employee wages or higher costs for consumers.

Benefits in kind

Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. In 2025/26, employers will also pay Class 1A NIC at 15% on the value of benefits (13.8% in 2024/25). […]

The figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) increase in line with inflation for 2025/26: [Chart…]

Uncertainty surrounding the tax treatment of double cab pick-up vehicles with a payload of 1 tonne or more has been addressed: such vehicles that are not predominantly suitable for carrying goods are to be treated as cars for benefit in kind purposes. […]

BUSINESS TAX

Motor Vehicles

Continuing the topic seen above on double cab pick-up vehicles, a similar change in approach applies in relation to plant and machinery capital allowances claims. From April 2025, most double cab pick-up vehicles with a payload of 1 tonne or more will need to be treated as cars for capital allowances purposes. […]

Making Tax Digital (MTD) for Income Tax

Under the government’s MTD for income tax initiative, businesses will be required to keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. […]

Electronic Invoicing

In Spring 2025, the government will launch a consultation about electronic invoicing (e-invoicing) to gather input from businesses on how HMRC can support investment in e-invoicing and encourage uptake within the business community. […]

Business Rates

For 2025/26, retail, hospitality and leisure (RHL) businesses will be given a 40% relief on their business rates. The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year. […]

NATIONAL INSURANCE FOR THE SELF-EMPLOYED

Self-employed individuals pay Class 2 and Class 4 National Insurance Contributions (NICs). The relevant rates and thresholds are: [Chart…]

TAX REGIME FOR FURNISHED HOLIDAY LETS

If you let out residential or commercial property, the profits are taxed as part of your ‘other income’. If you sell property that has been rented out, capital gains tax is likely to apply. Generally, rental business activity attracts fewer tax reliefs than trading ventures. […]

VAT

From 1 April 2025, the VAT registration and deregistration thresholds will remain at £90,000 and £88,000 respectively. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%. […]

CORPORATE TAXES

Rates from 1 April 2025

Corporation tax rates and thresholds for the financial year to 31 March 2026 remain unchanged as follows: [Chart…]

Roadmap

A corporate tax roadmap has been published by the government, with the view of creating a stable and predictable tax environment. This includes the following commitments:

• The corporation tax rates will not increase beyond the rates shown above. This includes retaining the small profits rate and marginal relief. […]

Research & Development (R&D) Reliefs

The R&D tax relief regime has seen a lot of change in recent years, and the Labour government is committing to the current rates of relief. […]

Annual Tax on Enveloped Dwellings (ATED)

Companies and some other entities may need to file ATED returns or pay ATED if they hold a UK residential property […]

PENSIONS

Despite numerous rumours of possible changes to the taxation of pensions in the run up to the budget, the Chancellor decided not to make significant changes after all. The ability to receive a 25% tax-free lump sum of up to £268,275 (or higher in some cases) remains. […]

INHERITANCE TAX

The main rate of IHT remains at 40%, reduced to 36% for estates where 10% or more is left to charity.

The IHT nil rate band will continue to be frozen at £325,000 until 2030. […]

Farmers and business owners

The government is proposing to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets with no financial limit. […]

UK RESIDENCY AND DOMICILE

Significant tax changes have been announced for UK resident non-domiciled individuals; namely those individuals spending most of their time in the UK but without permanently settling here. The concept of ‘domicile’ will be removed from the UK tax system and replaced by a regime based on years of tax residence.

Income and capital gains taxes

At present, individuals who are both resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains. […]

Inheritance tax

Currently inheritance tax applies to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK-situated assets of a non-domiciled individual. […]

STAMP DUTY

England and Northern Ireland – thresholds

It has been confirmed that the 0% thresholds for Stamp Duty Land Tax (SDLT) will be reduced from 1 April 2025 as follows: [Chart…]

SDLT on additional dwellings such as second homes

For transactions with an effective date (generally the date of completion) on or after 31 October 2024, the higher rates of SDLT […]

Scotland and Wales

Property purchasers in Scotland and Wales do not pay SDLT. […]

DEALING WITH HMRC

Interest on unpaid tax liabilities

From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%.

IN CONCLUSION

As we approach 2025/26, we know a number of our clients and contacts will be assessing the impact of the budget on their affairs. While some of our readers will benefit from the increases in public spending, for others, especially if you are an employer or business owner, it may be necessary to re-group and update your business plans for 2025 and onwards. Remember, we are here to work alongside you to ensure your business and personal success. Please do get in touch if there is anything that you would like to discuss.

DIARY OF MAIN TAX EVENTS

NOVEMBER/DECEMBER 2024 

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Disclaimer: This newsletter covers the key news headlines from the Autumn Budget 2024. The authors take great care in its production, but it is not exhaustive and should not be read as a full fiscal summary. The content displayed is correct as of 30 October 2024. We cannot take responsibility for any action taken or not taken from this document alone. Please contact us for personalised advice.