Budget 2024 – Was it as spooky as halloween?

Rachel Reeves started the Autumn Budget stating that this is not the first time it has fallen to the Labour party to rebuild Britain, listing 1945, 1964, and 1997 to illustrate her point.

Labour had pledged not to increase income tax, national insurance and VAT which meant that the first women chancellor instead had to raid other taxes like Capital Gains Tax and extending the tax thresholds freeze to find the £40bn needed to balance the budget.

Tax increases bought in from the budget

Reeves and Labour carefully navigated the government’s promise not to raise taxes on the ‘working people’ implementing instead a long anticipated increase in employers’ national insurance contributions. The drop in the threshold at which businesses start paying it is pretty startling from £9,100-£5,000. However, the employment allowance was raised from £5,000-£10,500 to ease the impact. This is expected to raise £25bn
“I know that this is a difficult choice,” Reeves adds “I do not take this decision lightly”
Before the budget announcement there was a lot of speculation about Capital Gains Tax (CGT). As predicted it was raised, increasing the lower rate from 10%-18% and the higher rate from 20%-24%. CGT on residential property will remain at 18-24%

Inheritance tax was also tightened up with inherited pensions being bought into its scope starting April 2027. Alongside a reform of agricultural and business property relief. Ms Reeves said: “Only 6% of estates will pay inheritance tax this year. I understand the strongly held desire to pass down savings to children and grandchildren, so I am taking a balanced approach in my package today.”
Reeves also froze the current thresholds until 2030. This means estates valued at up to £325,000 remain tax-free, with a tax-free allowance rising to £500,000 if a residence is passed to direct descendants and up to £1 million with the transfer of surviving spouses or civil partners relief.

These changes are not as great as some feared however there will be definite winners and losers and the impact of changes to IHT reliefs will affect liquidity on succession for larger family farms and businesses.
Unsurprisingly, the non-dom tax regime will be replaced from 2025 with a residence-based system aimed at international competitiveness for those residing in the UK temporarily.

Stamp Duty Land Tax
This is the change that will happen from tomorrow. The government has announced an increase in the higher rate of stamp duty land tax (SDLT) to target second homes. The rate on the SDLT surcharge for second homes, known as the higher rate for additional dwellings, will increase by two percentage points to 5%.

VAT on Private Schools
Reeves says she will introduce VAT on private school fees from January 2025, and that the government will soon introduce legislation to remove business rates relief for private schools from Apil 2025

Personal tax thresholds
A real curveball from Reeves on personal tax thresholds. Under the Tories, they were set to remain in place until 2028.
It had been expected that she would freeze them for another year, but no. “I have come to the conclusion that extending the threshold freeze would hurt working people. It would take more money out of their payslips,” she says.
It means from 2028-29 “personal tax thresholds will be uprated in line with inflation once again”.

Modernising HMRC
This pricked our interest – Reeves announced continued investment in HMRC, building on plans to recruit an additional army of compliance and debt officers (5000 new officers to be exact) They have promised to modernise HMRCs already extensive systems, technology and enforcement capabilities. Highlighting a clamping down on tax avoidance and the use of umbrella companies. This labour government are going after promotors of tax avoidance schemes. These measures are aimed to raise an additional £6.5bn

Implications for Businesses from the budget
With Labour effectively being boxed in on its promise not to increase taxes for individuals it means that much of the fiscal growth and responsibility falls on businesses. SMES and self employed individuals now face increased employer national insurance and a 6% hike in the national living wage though the chancellor reaffirmed its commitment to full expensing and the £1mil annual investment allowance.

Key Tax Measures from the budget
In the 90-minute Autumn Budget speech, the Chancellor outlined several tax changes:
• Increasing employer national insurance by 1.2 percentage points to 15% from April 2025
• Lowering the employer’s secondary threshold from £9,100 to £5,000 annually
• Raising the employment allowance to £10,500
• Freezing fuel duty at 5p for another year
• Raising the CGT lower rate to 18% and the higher rate to 24%
• Maintaining business asset disposal relief at 10% this year, increasing to 14% in April 2025 and 18% in 2026-27
• Confirming VAT on private school fees
• Increasing National Living Wage to £12.21 from April 2025
• Raising the energy profits levy on oil and gas to 38%
• Aligning alcohol duty rates with the Retail Price Index from February
• Phasing out the “domicile” concept from the tax system by April 2025
• Raising air passenger duty by 50% on private planes
• Increasing CGT on carried interest to 32% from April 2025
• Raising the stamp duty land tax surcharge for second homes to 5%

Reeves defended the tax-focused Budget as essential for stabilizing the public finances and laying a foundation for future economic progress.

If you have any concerns about the budget or what it means for you or your business then please reach out to us here

The full budget review from the government can be read here