2024 Autumn Budget Statement

31 Oct 2024 Autumn Budget Statement

On Wednesday 30 October 2024, after weeks of speculation and uncertainty, we had the first Labour Budget in 14 years and the first Budget to be delivered by a woman. With tax measures aiming to raise £40 billion to ‘fix the foundations of the economy and deliver change’, Rachel Reeves set out the mechanisms by which the Labour government aims to restore economic stability.

Our update is intended to give you some of the detail behind the measures announced by the Chancellor, but if you would like to know how the measures affect you and your business specifically, or you would like to discuss potential tax planning situations, please contact us and we will help to guide you through.

National Living Wage

From April 2025 the National Living Wage will increase by 6.7% from £11.44 to £12.21per hour to take into account the cost of living. This rate is applicable to those aged 21 and over. The government has set out its intention to have a single adult wage rate and there will therefore be an increase of 16.3% to the National Minimum Wage rate for 18-20 year olds to begin to close the gap.

The National Minimum Wage rates from April 2025 will increase as follows:

Age	Current Rate	New Rate From 6 April 2025
18-20 years old	£8.60	£10.00
Under 18 years old	£6.40	£7.55
Apprentice rate	£6.40	£7.55

A rise in the Carer’s Allowance Weekly Earnings Limit equivalent to 16 hours at the National Living Wage was also announced, which equates to an increase of £45 per week.

Income Tax

There are to be no increases in the rates of income tax. The government has also announced that it will not extend the freeze to income tax and National Insurance contributions thresholds and therefore from April 2028 these thresholds will increase in line with inflation. Freezing the thresholds and increasing pensions and wages will push more people into paying tax and increase those having to pay tax at higher rates.

National Insurance

As had been promised there will be no increase in Employee’s National Insurance but the rate of Employer’s National Insurance will increase by 1.2% from 13.8% to 15% from April 2025, and the per-employee threshold at which employer start to pay National Insurance will be reduced from £9,100 to £5,000 per year from 6 April 2025.

The impact of these changes will be reduced for many employers by the announced increase in the employment allowance from £5,000 to £10,500 per year and the removal of the £100,000 threshold, opening up the relief to all eligible employers.  This measure will mean that a projected 865,000 employers will not pay any National Insurance at all next year.

Capital Gains Tax

Potential changes to Capital Gains Tax (CGT) were perhaps the most highly debated area in the lead up to the Budget, with many individuals bringing forward transactions to protect against the possible loss of Business Asset Disposal Relief (BADR) and any increase to CGT rates. 

There will be much relief that BADR will remain at the £1 million lifetime allowance and the 10% rate applicable to this relief will also remain until April 2025 when it will increase to 14%, and then increase again to 18% in 2026 bringing it in line with the lower rate of CGT. 

CGT rates have indeed increased but not to the eye-watering levels predicted. The lower rate of CGT increased from 30 October 2024 from 10% to 18% and the higher rate of CGT from 20% to 24%. These rates are now in line with residential property rates which will remain unchanged. 

The CGT annual exemption also will remain unchanged at £3,000 until at least 5 April 2026.

Inheritance Tax

The nil rate band threshold for Inheritance Tax (IHT) will be frozen at £325,000 until 2030 and the residence nil rate band of £175,000 will also remain unchanged. 

Changes have been made however to Business Property Relief (BPR) and Agricultural Property Relief (APR) and these will be  applicable from April 2026. These reliefs will now be subject to a combined cap of £1million for 100% relief from IHT. Amounts in excess of the cap will only be eligible for relief at 50%.

An additional IHT measure announced in the Budget will impact the ability for individuals to use pensions as a vehicle for inheritance tax planning. Any inherited pensions, which were previously exempt, will fall into the scope of IHT from April 2027.

VAT

There are no changes to the VAT rate or the VAT registration threshold. The Chancellor confirmed the already announced measure to introduce VAT on private school fees from January 2025. 

Corporation Tax

The rates of corporation tax will remain unchanged with a cap on corporation tax at 25%. The Small Profits Rate of 19% and marginal relief will also be maintained at their current rates and thresholds. 

The £1 million Annual Investment Allowance and Full Expensing will be maintained for the remainder of this Parliament. 

There will also be no changes to the Research & Development rates. 

Vehicle Benefits In Kind

The Chancellor confirmed her commitment to maintaining the company car tax incentive for Electric Vehicles (EVs) beyond 2028. The rate is currently increasing by 1% per year to 5% in 2027/28. They have announced today that in 2028/29 and 2029/30 the rate will increase by 2% per year, resulting in a company car tax rate for EVs of 9% in 2029/30.

Rates for other vehicles will increase by 1% per year in 2028/29 and 2029/30, meaning those vehicles in the highest band having a rate of 39% in 2029/30.

Double Cab Pick Up vehicles with a payload over one tonne purchased after 5 April 2025 will be treated as cars for the purposes of capital allowances and benefits in kind. Vehicles purchased or leased before this date will be able to use the previous treatment, until the earlier of disposal, lease expiry or 5 April 2029.

SDLT

With effect from 31 October 2024 the supplement for purchases of second or additional homes by individuals will increase from 3% to 5% and for companies buying UK residential property worth over £500,000, the rate of SDLT will increase from 15% to 17%.

The withdrawal of the temporary residential rates of SDLT will continue as planned and from 1 April 2025:

• The residential nil rate band will revert to £125,000
• The first-time buyers’ relief nil rate band will revert to £300,000; and
• The maximum transaction value for first-time buyers’ relief will revert to £500,000.

Business Rates

In addition to private school fees becoming vatable, the government will also remove the business rates charitable rate relief from private schools in England from April 2025.

A 40% business rates relief will be applicable for retail, hospitality and leisure sectors from 1 April 2025 with a cap of £110,000 per business. This is a reduction to the current 75% relief but businesses will now at least have certainty about the relief available for 2025/26. 

The small business rates multiplier will be frozen for 2025/26 at 49.9p. 

Non-UK Domiciled Individuals

As previously announced, the non-dom tax regime will be abolished in favour of a new residence-based system from April 2025.

Duties

• Fuel duty will not increase in 2025/26 and the 5p cut implemented by the Conservatives will be maintained. 
• Alcohol duty will rise in line with inflation but there will be a cut in draught duty of 1.7% which the Chancellor says will result in a penny off a pint!
• Tobacco duty will increase by 2% above inflation for the remainder of the parliament.
• Air Passenger duty on private jets will increase by 50%, up to £450 per flight.

Our summary doesn’t cover all of the measures to be implemented by the Chancellor, but we have tried to cover the items that we think will impact on our clients. If you would like to discuss the impact of any of the other measures on your business, please contact us and we will be happy to discuss this with you.

The information outlined is intended for guidance only. It is based upon our understanding of current legislation and announcements and is correct at the time of publication. No liability is accepted by R J Francis & Co for actions taken in reliance upon the information given and it is recommended that appropriate professional advice should be taken specific to your circumstances.