Autumn Budget 2024

31 October 2024

Accounting & Compliance, Estate Planning / IHT, Payroll, People, Property Investors & Developers, Property Owners, Reducing Tax

Yesterday we saw Chancellor Rachel Reeves present her first budget to parliament – a marked day for women in politics, being the first Budget to ever be led by a woman.

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.

With the Chancellor repeatedly reminding viewers of the theme of protecting the working class and Labour’s manifesto promise to not raise taxes, did this ring true? Let’s look at the headlines…

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.
The big one!!!! Increased costs for many employers from April 2025 through both increases to the national minimum wage and significant reforms to employers’ national insurance contributions. See below the impact for employers is scary!
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.

We’ll be releasing more industry specific content on the Budget with a more in-depth analysis of the effects it’ll have on specific businesses and individuals, however for now let’s take a broader look at some of the main headlines.

The most important advice we can give you is if you’re concerned about any of the headlines you’ve read about or heard, then please get in contact with us. We’ll be more than happy to chat with you about the affects for you personally and discuss steps you can take to mitigate the impact.

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:

Entrepreneurs will be pleased to learn that Business Asset Disposal Relief (BADR) will continue to apply when they dispose of their business, with rumours circulating pre-Budget that this would be scrapped altogether.

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.

Property Investors may also be relieved on this announcement, as rates for residential property sales have remained unchanged.

There were strong speculations that CGT would be aligned with Income Tax Rates, with gains being taxed at up to 45% if this were the case. It’s certainly a welcome confirmation that rates won’t be increasing to this scale.

National Minimum Wage (NMW) and Employers National Insurance

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.

	1 April 2025 – 31 March 2026	1 April 2024 – 31 March 2025
NLW – age 21 and over	£12.21	£11.44
NMW – 18-20 year old	£10.00	£8.60
NMW – 16-17 year old and apprentice	£7.55	£6.40

Labour announced a move towards having a single adult rate for the NWM, with the percentage increases for the 18-20 year old rate (16.3%) and the 16-17 year old and apprentice rate (18.0%) increasing significantly. Whist in the short term this is good news for workers, employers will need to carefully consider affordability when planning their headcount for the year ahead.

In terms of National Insurance, whilst Labour stuck to their promise of protecting the workers in this instance by ensuring people’s payslips weren’t negatively impacted, it’s a completely different story for employers.

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

An increase in the employers’ NICs rate, from 13.8% to 15%;
A decrease to the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000*; and
A widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500. In particular, the employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

* A higher secondary threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

This increase in employers’ NICs is undoubtedly a blow to most 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.

We’ve made a very simplistic calculator tool to work out the scale of the impact to your business of these changes. Please note that individual circumstances may vary, and our calculator works on an average cost so will not be to the penny accurate, however it gives you a good indication of the scale of the further NI your business will be liable to.

A company with a £400,000 payroll and 15 employees earning more than £9100 each will see their employer NI costs go up by almost £7,000. Worst affected will be companies which engage a lot of low paid employees- for example hospitality, day nurseries, cleaning companies etc….

If the results of this calculator concern you, please get in contact with us. We will be able to review your specific wage costs to quantify more accurately the impact on you and discuss your business model as a whole with the aim of mitigating as far as possible the impact.

Double Cab Pick Ups

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.

However, vehicles that were acquired or ordered before 6 April 2025 can be treated as vans until the earlier of disposal, lease expiry, or 5 April 2029.

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.

This is less favourable than the current common classification as a goods vehicle.

While the change applies from April 2025, if the expenditure was incurred as a result of a contract entered into before 1 April 2025 for companies, or 6 April 2025 for non-corporate businesses, and the expenditure is incurred before 1 October 2025, it can continue to be treated as a goods vehicle.

Tip – If you are considering buying a double cab pick-up vehicle with a payload of 1 tonne or more, acquiring or ordering it before 6 April 2025 could ensure it attracts the more beneficial tax treatment for vans.

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.

Individual contributions continue to attract income tax relief at the individual’s marginal tax rate and can be particularly effective where net income is between £100,000 and £125,140, where the personal allowance is tapered.

Employer pension contributions continue to qualify for a deduction against business profits and the rumour that employers’ national insurance would be imposed on pension contributions did not materialise.

Note that the £60,000 annual allowance limit continues for 2025/26 and applies to the combined individual and employer contributions.

Undrawn Pension Fund

One change that was however announced was to make an individual’s undrawn pension fund subject to inheritance tax.

From 6 April 2027, it is proposed that most undrawn pension funds and death benefits be included within the value of a person’s estate for inheritance tax purposes and for pension scheme administrators to become liable for reporting and paying any inheritance tax due on pensions to HMRC.

This will be a potentially devastating announcement for those sitting on a significant pension pot, as they now risk losing up to 40% of any undrawn pension upon death.

The phrase, “you can’t take it with you…” rings true, except you also can’t leave it behind now!

Pension planning will now be a lot more important for some to ensure pension funds aren’t just building up unspent in estates.

Inheritance Tax

Whilst the IHT rate and thresholds remain unchanged, a vital announcement was made with potential affects for businesses and those owning agricultural land.

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.

From 6 April 2026, it is proposed that 100% relief will only apply to the first £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million.

This means the relief will be focused on small family farms and businesses.

In a further proposed change, the rate of BPR available for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM or unlisted trading companies, will be reduced from 100% to 50%.

Stamp Duty

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

	From 1 April 2025	1 April 2024 to 31 March 2025
Main threshold	£125,000	£250,000
First-time buyers’ threshold	£300,000	£425,000

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 payable by purchasers of ‘additional dwellings’ (i.e. When they already own one dwelling), and by companies, increases from 3% to 5% above the standard residential rates.

This measure is clearly targeted at buy-to-let landlords and those acquiring second homes.

As an example, for a landlord wishing to add an additional property to their portfolio with a purchase price of £350,000, pre-Budget they would have been paying SDLT of £15,500.

From 1 April 2025, however the SDLT on the same property will be £25,000.

The rate of SDLT payable by companies and non-natural persons (e.g. Trusts) acquiring dwellings for more than £500,000 increases from 15% to 17% also from 31 October 2024.

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, there is a lot to unpack in this budget and 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.

The content in this blog is correct as of 31st October 2024. See terms and conditions.