The 2024 Autumn Budget
The 2024 Autumn Budget has been mired in controversy, both pre and post announcement. Furthermore, some argue it is more driven by ideology than has been the case previously.
As usual, in this article we'll focus on those changes most likely to have an impact on you and your business.
The 2024 Autumn Budget - Employment Taxes
Putting matters into context, when we say Employment Taxes, we mean NI contributions and benefits in kind e.g. company cars. private medical etc.
National Insurance contributions
The Class 1 NI threshold for employer contributions will reduce from £9,100 to £5,000 per year. As it currently stands, this will result in an increase to your corporation tax liability if you're a sole director run company.
Additionally, the rate of Employers Class 1 NI contributions (plus Class 1A and Class 1B), increases from 13.8% to 15% from 6 April 2025.
Furthermore, the Employment Allowance will increase from £5,000 to £10,500. Importantly, the previous restriction will be removed. This means that employers can claim the Employment Allowance regardless of the size of their wages bill. However, the only real 'winners' from The 2024 Autumn Budget will be employers with a wages bill of less than £150K per annum.
The increases to National Insurance plus the National Living Wage will negatively impact on small businesses looking to recruit more staff. It will also affect those larger businesses in the hospitality sector who employ a number of part-time staff.
Benefits in Kind - real time reporting
Starting from April 2026, businesses must payroll most Benefits In Kind (BIK). At the moment, you can voluntarily payroll employment-related loans and accommodation benefits.
Therefore, in future the reporting process for BIK will be similar to employee payroll reporting via RTI. Presumably the existing penalty provisions for errors and non-compliance will be amended in line with the new reporting process.
Double cab - pick-up vehicles
From 6 April 2025, double cab pick-up vehicles with a payload of one tonne or more will be reclassified as 'cars' for BIK purposes.
Consequently, they will no longer be treated as goods vehicles or vans. However, transitional arrangements will apply if you purchased, leased, or ordered a double cab pick-up before this date. You can continue using the previous classification until they dispose of the vehicle, the lease expires, or 5 April 2029.
There was uproar when HMRC attempted to change the rules, earlier this year. This change will therefore upset many in the building/property sector. However these new rules apply for income tax and not VAT purposes. It's currently unclear if VAT recovery will be blocked by HMRC on future purchases of new vehicles.
Company cars
The appropriate percentages for calculating company car benefits have been published. For zero-emission vehicles, this percentage increases by two points per year in the 2028-29 and 2029-30 tax years
Vehicles emitting 1g to 50g CO2 per km, including hybrids, will incur an 18% charge in 2028-29 and 19% in 2029-30. Meanwhile, all other emission bands will increase by one percentage point each year. The maximum percentages will reach 38% in 2028-29 and 39% in 2029-30.
Surely these changes fly in the face of this government's supposed 'green' credentials? There are a number of issues with owning an electric car in the UK (e.g. lack of charging facilities) however this makes the tax benefits less attractive.
Additionally, the increased benefit in kind tax charge will make owning a conventional car via your company even less desirable.
Director and employee beneficial loans
The commitment previously made by HMRC in January 2000, that the official interest rate will not increase in-year, no longer applies.
This rate will continue to be reviewed quarterly, though may increase, decrease, or be maintained throughout the year. Therefore if you're a director, you'll need to monitor even more closely any personal drawings from your company in future.
The 2024 Autumn Budget - Capital Allowances
Electric cars and electric car charging points
The 100% First Year Allowances (FYAs) for zero-emission cars and electric vehicle charging points will continue until April 2026.
Additionally, for zero-emission cars and charging points, the 100% FYAs will be extended until 31 March 2026 for Corporation Tax and until 5 April 2026 for Income Tax.
Double cab pick-ups
From April 2025, double cab pick-ups with a payload of one tonne or more will be reclassified as cars for capital allowance purposes. This means the cost of acquiring a new double cab pick-up will no longer be eligible for a 100% write-off in the year of purchase.
However, the existing capital allowances rules (i.e. 100% write off) applies to vehicles purchased before April 2025. Transitional arrangements apply where expenditure occurs on a double cab pick-up due to a contract made before April 2025. Although, this expenditure must occur on or after that date but before 1 October 2025.
Additionally, HMRC 's guidance now indicates that a vehicle designed and marketed as a multi-purpose vehicle is likely to be classified as a car. Furthermore, if a vehicle serves multiple purposes without a predominant use, it is also likely to be a car.
The 2024 Autumn Budget - Capital Gains
Rates of tax
There was considerable trepidation that the Labour government would increase the rate of Capital Gains Tax ('CGT') in line with income tax rates.
From 30 October 2024, the lower rate of CGT rises from 10% to 18%. Meanwhile, the higher rate increases from 20% to 24%. The CGT rate for trustees and personal representatives will also increase to 24%.
Transitional rules will apply to certain situations. For example, this includes forestalling arrangements linked to unconditional but uncompleted contracts before 30 October 2024.
Disposals under these contracts face the new CGT rates unless the parties demonstrate they weren't aiming for a tax advantage based on timing rules. If the parties are connected, they must prove the contract was for wholly commercial reasons. What's more, where a gain exceeds £100,000, a statement is required.
Business Asset Disposal and Investors Relief
Business Asset Disposal Relief ('BADR') remains at £1,000,000. Whereas from 30 October the lifetime limit for Investors’ Relief is reduced from £10,000,000 to £1,000,000.
Additionally, from April 2025, the rates for BADR and Investors’ Relief will increase from 10% to 14%, then to 18% from 6 April 2026. The lifetime limit for BADR will remain frozen at £1,000,000. Special rules will apply for contracts entered into on or after 30 October 2024 and share reorganisations where an election is made.
The 2024 Autumn Budget - Income tax allowances and rates
Personal allowances
The allowances for 2025-26 remain unchanged, with a few exceptions.
Firstly, the Married Couple's Allowance for those born before 6 April 1935 will increase. The maximum allowance rises to £11,270 from £11,080 in 2024-25. Additionally, the minimum allowance will go up to £4,360 from £4,280 in 2024-25.
Secondly, the Blind Person's Allowance increases to £3,130 from £3,070 in 2024-25.
Moreover, the freeze on allowances and rates will end on 5 April 2028.
High Income Child Benefit Charge
The government will not proceed with reform to base the High-Income Child Benefit Charge (HICBC) on household incomes. This is surprising given the existing anomaly which taxes an individual high earner, though not a household receiving potentially higher income.
The 2024 Autumn Budget - Inheritance Tax
Thresholds
The current IHT thresholds will remain unchanged until 5 April 2030. Therefore Individuals will still receive a £325,000 Nil-Rate Band (NRB) and a £175,000 Residence Nil-Rate Band (RNRB). The RNRB will taper at a rate of £1 for every £2 when the estate's net value exceeds £2 million.
Agricultural Property Relief (APR) and Business Property Relief (BPR)
A restriction to Agricultural Property Relief (APR) and Business Property Relief (BPR)
will apply from 6 April 2026. Whilst the rate of APR and BPR will stay at 100% up to a combined allowance of £1 million, relief will drop to 50% for any value in excess of this amount.
The allowance will apply proportionately across qualifying properties when the total exceeds £1 million. However those assets that automatically receive 50% relief (e.g. land/buildings used in a trade) will not use up the allowance.
For agricultural or business property with an ordinary 50% relief rate, the new allowance also does not affect this rate.
However, you cannot transfer any unused allowance between spouses or civil partners
The £1 million allowance covers property in an estate at death plus lifetime transfers to individuals within seven years before death. In addition, it includes chargeable lifetime transfers with an immediate lifetime charge
Trustees will have a combined £1 million allowance for that qualifying property eligible for 100% relief.
These new rules apply to lifetime transfers on or after 30 October 2024 where the donor dies on or after 6 April 2026.
By introducing these restrictions, HMRC have the potential to raise Inheritance Tax receipts significantly - see below.
An example
An interest of £3 million in unquoted trading company shares would attract 100% BPR on the first £1 million. The next £2 million would qualify for 50% BPR, resulting in an IHT liability of £400,000 before any other exemptions apply.
BPR on Alternative Investment Market (AIM) Shares
Prior to the Budget there were concerns that abolishing BPR on AIM shares would negatively impact on private investment in start-up companies. However these have been mitigated by the changes below.
From 6 April 2026, BPR will drop to 50% on shares not listed on recognised stock exchange markets, such as AIM. This rate will remain unaffected by the new £1 million allowance.
IHT on pension schemes
From 6 April 2027, any unused pension funds and death benefits will form part of the estate for IHT purposes. Currently, pensions held in trust are outside the scope of IHT. Pension scheme administrators will need to report and pay any IHT due on unused pension funds.
It appears the government have chosen a different approach to taxing pension funds, rather than reintroducing the lifetime allowance or apply NI to pension contributions.
As a result this could discourage the wealthy from overloading their pension schemes. They'll therefore look to alternative investment structures for their families (see above).
The 2024 Autumn Budget - Corporation Tax
Corporate Tax Roadmap
With the Corporate Tax Roadmap the government aims to restore stability and rebuild business confidence. It is intended to create a stable and predictable environment for businesses. One of those key areas is maintaining stable Corporation Tax rates.
The government also plans to keep current capital allowances and rates. Additionally, they will simplify these processes, considering full expensing for those assets purchased for leasing or hiring.
The merged RDEC scheme, ERIS, and Patent Box relief will remain in place. The government will improve admin and guidance for these schemes. In addition, they will launch a research and development disclosure facility. The Roadmap will maintain support for the audio-visual and video gaming sectors.
Finally, the government aims to modernise tax processes and technology. It's hoped this will provide greater certainty and efficiency for businesses.
The 2024 Autumn Budget - VAT
VAT on private school fees
From 1 January 2025, the VAT exemption on private school fees will be removed. As a result, all education services and vocational training provided by private schools in the UK will be subject to VAT. These services will incur VAT at the standard rate of 20%
This change also applies to boarding services provided by private schools. Furthermore, if a private school invoices or takes payment for fees from 30 October 2024, VAT will be due. This applies to terms starting on or after 1 January 2025.
It's debatable as to whether private schools should be regarded as 'charities' for VAT purposes. However, one major criticism of these changes is that insufficient time has been provided for private schools to adapt to these changes. Furthermore, it is not clear at present what impact these changes will have on the state education system.
The 2024 Autumn Budget - Tax compliance
Late payment interest
From 6 April 2025, the late payment interest rate on unpaid tax liabilities will rise by 1.5 percentage points.
Regulation of tax advisers
There will be mandatory registration of tax advisers with HMRC starting in April 2026. From this date onwards, all tax advisers must register with HMRC before interacting with them. Additionally the government will also invest £36 million to modernise HMRC’s tax adviser registration services.
In early 2025, the government will publish a consultation on measures to tackle promoters of marketed tax avoidance. This will include new powers targeting those who own or control promoter organisations. It will also explore options for addressing legal professionals involved in avoidance schemes.
Closing the tax gap - investment
The government has announced significant investments, including:
The 2024 Autumn Budget - Summary
As expected there were a number of dramatic changes introduced in the Autumn Budget and this article should be regarded as a high level overview.
The draft legislation amounts to hundreds of pages. Additionally, this is supported by tax information and impact notes etc, plus consultations on possible future changes.
In many cases, the new legislation is adding layers of complexity onto an already bloated and complex tax legislation. This seems to fly in the face of the tax simplification mantra fed to us by the government in recent years.
For more useful information, check out our Ebooks here.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
Alternatively, please feel free to complete our Business Questionnaire here.