In the latest Budget, the government announced £40 billion in tax increases, with a significant portion of the burden falling on businesses. Changes to National Insurance rates and payment thresholds for employers alone are expected to raise approximately £25 billion. Additionally, increases in Capital Gains Tax (CGT) rates have been introduced, even though they still rank among the lowest within the G7 countries.
There’s some relief for business owners with a freeze on fuel duty and a notable rise in the Employment Allowance, set to more than double starting in 2025. However, these benefits may not extend to all, as many businesses will face increased National Insurance Contribution (NIC) obligations.
Below is a summary of the main measures from the Autumn Budget 2024 that may impact you and your business.
Employer National Insurance Adjustments
One of the significant changes in this Budget is the rise in employer NIC rates. Currently, employers pay 13.8% NIC on employee wages exceeding £9,100. Starting April 2025, this rate will go up to 15%.
Moreover, the wage threshold at which employer NIC becomes due will drop from £9,100 to £5,000, remaining at this level until 2028 before adjusting annually for inflation.
To assist businesses with these increased costs, the Employment Allowance will be expanded. This allowance currently enables qualifying businesses with previous-year employer NIC bills of £100,000 or less to deduct £5,000 from their employer NIC charges. Beginning in April 2025, the allowance will increase to £10,500, and the eligibility cap will be lifted, allowing all businesses with employer NICs to benefit from the allowance.
Capital Gains Tax Changes
For residential properties, the CGT rates remain the same, at 18% for basic rate taxpayers and 24% for higher rate taxpayers. However, CGT on other assets, such as shares, will see an increase. Carried interest CGT is set to rise to 32% from April 2025.
Asset Type | Old Basic Rate | New Basic Rate | Old Higher Rate | New Higher Rate |
Residential Property | 18% | 18% | 24% | 24% |
Shares & Other Assets | 10% | 18% | 20% | 24% |
For business owners, a commonly used CGT relief, Business Asset Disposal Relief (BADR), will undergo changes, with rates gradually increasing over the coming years.
The government has also announced an adjustment to carried interest CGT rates, which will increase to 32% from April 2025.
Inheritance Tax Changes
The current IHT thresholds—£325,000 nil rate band and a £175,000 residence nil rate band for direct descendants—will remain unchanged until 2030. In addition, reliefs for agricultural and business properties are to be modified: the first £1 million in agricultural and business assets will continue to receive 100% relief, but assets exceeding this amount will only receive 50% relief, effectively lowering the IHT rate to 20% on these assets.
Starting April 2027, unspent pension funds will also be included in IHT calculations, bringing pension assets within the scope of IHT once again.
National Minimum Wage Increase
The National Living Wage will rise by 6.7% to £12.21 per hour from April 2025 for employees aged 21 and above. Rates for 18- to 20-year-olds will increase by 16.3% to £10.00 per hour, aligning with the government’s objective of reducing the disparity in pay based on age.
VAT on Private School Fees
As of January 2025, private school tuition, vocational training, and boarding services will incur VAT at the standard rate of 20%. Additionally, from April 2025, private schools in England will no longer receive business rates relief.
Reform of the ‘Non-Dom’ Tax Regime
The government will replace the current system allowing non-domiciled residents to be taxed on overseas income only when remitted to the UK. Starting April 2025, new residents will be taxed on foreign income and gains upon arrival, though they’ll receive a four-year exemption for income earned abroad.
Summary
The Autumn Budget 2024 brings significant changes for UK businesses and individuals, with major updates to National Insurance, Capital Gains Tax, and Inheritance Tax. Navigating these shifts may require strategic adjustments to manage potential impacts and optimise relief opportunities. If you’d like to understand how these changes could affect your financial plans or tax obligations, please don’t hesitate to get in touch with us. Our team is here to help you make informed decisions and maximise your financial wellbeing.