The Autumn Budget: What does it mean for you?

On 30 October 2024, Chancellor Rachel Reeves delivered her highly anticipated Autumn Budget. While the outcomes will affect each of us differently, depending on our individual circumstances, we have taken some time now to highlight some of the main decisions she announced.

There is a lot still to digest with many discussions to be had. We will continue to keep you updated with our thoughts and ideas on your financial planning.

If you do have any immediate concerns or queries, please do get in contact with us.

So, what are our thoughts on the opportunities and observations of the outcome of this budget?

Capital Gains Tax (CGT)

The rates of CGT for disposals made on or after 30th October 2024 will increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher and additional rate tax payers. Anti-forestalling rules will be introduced for certain unconditional but uncompleted contracts entered into before 30th October 2024. Individuals will still benefit from the CGT annual allowance of £3,000.

ACTION: Speak to your tax adviser

Employer National Insurance Contributions (NICs)

The rate of employer NICs is increasing from 13.8% to 15%. The per-employee threshold at which employers become liable to pay National Insurance (the Secondary Threshold) will be reduced from £9,100 to £5,000. Both changes come into effect from 6 April 2025.

This will affect business owners like us. The first business owner that I spoke to about this said it would add millions of pounds to their costs.

ACTION: Calculate the increased costs to assess the financial impact this increase will have on your cost base. Review your budget and discuss how you will be able to meet these increased costs.

Stamp Duty Land Tax (SDLT) surcharge

The rate of the SDLT surcharge for second homes will increase from 3% to 5%, and the single rate of SDLT payable by companies and non-natural persons acquiring dwellings for more than £500,000 will increase from 15% to 17%. These changes will apply to transactions with an effective date on or after 31 October 2024.

OBSERVATION: This will have an impact on the buy-to-let/investment property sector. There has already been a decline in the number of purchases in this area and we have noticed a number of landlords focusing more on securing competitive buy-to-let mortgage products. This has not stopped an increase in the rent being charged to private tenants.

Money Purchase Pension Plans

Unspent pension funds and death benefits payable from a money purchase pension plan will be brought within the scope of IHT from 6 April 2027. A technical consultation regarding these changes will be carried out in 2025.

OBSERVATION: We will need to wait for the details of this consultation. Between now and 6 April 2027, these pensions monies will remain IHT free.

When we do your planning meetings next year, we will need to review what impact this change would have on your needs. We expect to see an increase in the number of enquires for Whole of Life assurance plans.

Contrary to speculation, there has been no change to the nil-rate band threshold, which will remain at £325,000 until at least 5 April 2030, and no extension of the current 7-year period for Potentially Exempt Transfers.

Value Added Tax (VAT) on private school fees

As anticipated, the government will proceed with the implementation of VAT on private school fees with effect from 1 January 2025.

This change will impact any school fees paid from 29 July 2024 that relate to terms starting on or after 1st January 2025. If you have paid any fees between these dates, you are likely to be captured.

Non-Domicile Regime

This is a tax status that has been in place since the French Revolution. It allows an individual that was born in another country or if their parent is from another country to only pay tax in the UK on their UK income.

The government believes there is an unfairness in the tax system and that everyone who is long-term resident in the UK pays their taxes here.

The remittance basis of taxation of non-domiciled individuals (“non-doms”) will be abolished from 6 April 2025, from which date the non-dom regime will be replaced with a new residence-based regime.

ACTION: Speak to your tax adviser

Furnished holiday lettings

The government will introduce new legislation in the Finance Bill 2024-25 to abolish the furnished holiday lettings tax regime. This will take effect from 1 April 2025 for businesses and from 6 April 2025 for individuals.

OBSERVATION: For those of you that own furnished holiday lettings you may want to check how this new legislation is going to financially affect you.

Inheritance tax (IHT)

The government has announced its intention to reform agricultural and business property relief from April 2026. From this date, the current 100% rate of relief will be maintained for the first £1 million of combined agricultural and business assets, and will be 50% thereafter. In all circumstances, the rate of business property relief for AIM-listed shares (and other shares designated as “not listed” on the markets of a recognised stock exchange) will be reduced to 50%.

Tax treatment of carried interest

The government has announced that the rate of capital gains tax (CGT) on carried interest will increase to 32% (currently 28%) from 6 April 2025. This rate will remain in place until the implementation of a wider reform package for carried interest in April 2026.

The government will bring carried interest into the Income Tax framework. What this means, is that from 6 April 2026 all carried interest will be treated as trading profits. It will therefore be subject to income tax at 45% and Class 4 National Insurance Contributions (NICs) at 2%. This will, in turn, be subject to special computation rules for so-called “qualifying” carried interest which would be adjusted by applying a 72.5% multiplier. The result is an expected effective tax rate for “qualifying” carried interest of 34.08%. Non-qualifying carried interest will not benefit from the multiplier and will therefore be subject to income tax and Class 4 NICs at the full 47% combined rate.

This revised regime for carried interest will sit alongside the existing disguised investment management fee (DIMF) rules and the income-based carried interest (IBCI) rules.

“Qualifying” carried interest will be carried interest that is not currently already subject to income tax at 45% and Class 4 NICs at 2%, such as IBCI (broadly applicable where the fund paying the carried interest has held its assets for less than a minimum holding period).

In terms of its implementation, the government has ruled out any grandfathering or other transitional provisions. This means that existing fund and carried interest structures will not be excluded from the revised regime once it takes effect in April 2026.

ACTION: For those of you who run businesses or operate in the investment funds sector, for example, you should seek tax advice on the implications of these changes for you.

Corporation Tax

The headline rate of corporation tax will be capped at 25%.

Small profits rate and marginal relief at current rates and thresholds will be maintained.

ACTION: No change

Business Asset Disposal Relief (BADR), colloquially  known as “Entrepreneurs’ Relief”

The applicable rate of capital gains tax for BADR will increase from 10% to 14% for disposals made on or after 6th April 2025, and then to 18% for disposals made on or after 6 April 2026. Applicable lifetime gains remain capped at £1m. Anti-forestalling rules will be introduced for certain contracts entered into between 30th October 2024 and 5 April 2026 (inclusive).

This relief is beneficial for business owners looking to sell their business. It is important to be aware of the timescales and reliefs that will apply and when.

ACTION: Speak to your tax adviser.