Autumn Budget 2024 Summary

The Autumn Budget 2024 introduced several important tax changes aimed at generating £40 Billion in additional tax revenue which the Government has said is needed to fix a deficit and ensure growth over the next decade. Whilst there have been a number of significant changes, not all of those covered in the press over recent months have been implemented, so for some, it will not be as bad as initially feared. 

There still remains plenty of scope for planning and to structure your affairs in a tax efficient manner so please do get in touch if you believe any of these changes are going to impact you, or if you wish to discuss your personal circumstances further.

Here are some key changes:

Capital Gains Tax

The changes are perhaps not as dramatic as originally feared, however, with the implementation from Wednesday, it leaves little scope for planning for those affected individuals. The changes increase:

• the main rates of Capital Gains Tax (CGT) that apply to assets other than residential property and carried interest from 10% and 20% to 18% and 24% respectively, for disposals made on or after 30th October 2024. The exact rate will depend on the individual’s income level for the tax year of disposal.
• the rate of CGT that applies to trustees and personal representatives from 20% to 24% for disposals made on or after 30th October 2024.
• the rate of CGT that applies to Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026. The BADR limit is £1 million with the IR limit reducing from £10 million to £1 million from 30th October 2024.

The rates of CGT that apply to residential property disposals (18% and 24%) will remain unchanged which is unexpected. These disposals remain reportable to HMRC, and the tax paid, within 60 days of the date of completion via a CGT Return.

There are special provisions for contracts entered into before 30th October 2024 but completed after that date for the main rate changes, and for contracts entered into on or after 30th October 2024 for the phased rate change that applies to BADR and IR. There are also special provisions for share reorganisations and exchanges where an election is made.

Inheritance Tax

The changes will bring a larger number of estates into the Inheritance Tax net with some complexities to be worked through, especially for those with farms and businesses who will be impacted in particular.

• The reform of agricultural property relief and business property relief from 6th April 2026 by maintaining 100% relief for the first £1 million of combined assets and 50% relief thereafter, and 50% relief for “not listed” shares on the markets of a recognised stock exchange. The Government estimate that these reforms will affect the wealthiest 2,000 estates each year. It is important to note that the £1 million allowance is not transferrable between spouses/civil partners and therefore it is important for affected clients to review their Will and estate planning options.
• Unused pension funds and death benefits payable from a pension will be included in the value of estates from 6th April 2027. The Government say this removes a distortion which has led to pensions being used as a tax planning vehicle to transfer wealth rather than their original purpose to fund retirement. They do not appear to have removed the 25% tax free withdrawal rules, so there may be scope for planning around this and so a discussion in conjunction with your financial adviser could be beneficial.
• The thresholds are to be maintained at current levels for a further two years until 5th April 2030.

Importantly, estates will continue to benefit from the nil-rate band, residence nil-rate band, and other exemptions (such as for transfers between spouses and civil partners and charity exemption). Transfers to individuals more than 7 years before death will continue to fall outside the scope of inheritance tax.

Interest

There will be an increase in the interest rate charged by HMRC on unpaid or late paid tax. Currently the rate stands at 7.5% but will rise by a further 1.5% which will add to the significant cost already imposed by HMRC.

Stamp Duty Land Tax (“SDLT”)

There will be an increase in the rate payable by those purchasing second homes and purchases by companies. It looks to further deter those looking to invest in buy-to-let property or those who dream of owning a holiday home, but should help those looking to get on the property ladder or move main residence due to less competition. The higher rate surcharge will increase to 5% from 3% for purchases on or after 31st October 2024. The measure also increases the single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000, from 15% to 17%.

Note from Sarah Bent, Head of Residential Conveyancing: 

Following the eagerly anticipated budget announced on 30th October, it has been confirmed that the higher rate of SDLT payable on additional properties, has been increased from 3% to 5%, meaning an uncomfortable tax hike for those in the process of buying additional properties.

SDLT is a tax payable to the government on the purchase of property and land.  There are various different rates that apply depending on if you are a first time buyer, whether you are replacing your main residence or buying additional properties. The rate you pay depends on the price you pay for the property and your individual or joint situation and circumstances.

The government announced that the rate of SDLT payable when purchasing additional properties is being increased from 3% to 5% from 31st October 2024.  This is payable where purchasers are buying additional property with a purchase price over £40,000. 

This will leave many buyers who are currently going through the conveyancing process in the unfortunate position of having to now either find additional funds to pay the increase in SDLT or make a decision as to whether they are in the financial position to proceed with their purchase and make even higher SDLT payments. This will impact many different people in different ways and will put a lot of chains under pressure as buyers assess their financial positions.

This tax rate rise will also affect companies purchasing properties, as companies automatically attract the higher rate SDLT on properties purchased in a company name.

Non UK Domiciled individuals:

• A new residence-based regime will replace the current Non UK Domicile regime from April 2025 and the Government say it will be designed to attract investment and talent to the UK.
• Offshore trusts will no longer be able to be used to shelter assets from Inheritance Tax, and there will be transitional arrangements in place for people who have made plans based on current rules.
• The planned 50% reduction for foreign income in the first year of the new regime will be removed.

Corporation Tax

The main rate remains at 25% for profits over £250,000, with the small profits rate of 19% for profits up to £50,000 also remaining. Those with profits between £50,000 and £250,000 will continue to benefit from “marginal relief” so they will not pay at the main rate.

Employer National Insurance Contributions (“NIC”)

This is to increase by 1.2% to 15%, however, this is lower than the 2% speculated in the press and hasn’t been extended to employer pension contributions. The employee earnings threshold at which employers start to pay NIC down from £9,100 to £5,000. However, the smallest businesses will be protected as the Employment Allowance will increase to £10,500 from £5,000 and be extended to all eligible employers by removing the £100,000 cap. This will allow companies to employ up to four National Living Wage workers full time without paying employer NIC on their wages. Employer NIC remains tax deductible for the business.

Minimum Wage

With effect from the 1st April 2025:

• The rate for those aged 21 and over will rise from £11.44 to £12.21 per hour
• The rate for those aged 18-20 will rise from £8.60 to £10.00 per hour, which is the largest increase on record
• The rate for those aged 16-17 and apprentices will rise from £6.40 to £7.55 per hour

Note from Andrew Heeler, Head of Corporate Department: 

From a corporate point of view, the two main issues will be changes in national insurance (NI) and minimum wage changes. NI changes will make employees much more expensive than they were, so this might impact on companies willingness to take on more staff. The increase in minimum wage will likely cause a ripple effect with other salaries, again making employing people more expensive and could cause a rise in unemployment. According to the Office for Budget Responsibility, this budget is likely to cause a rise in inflation and keep interest rates high.

Note from Chris Brown, Head of the Family Department: 

After much speculation the new Chancellor, Rachel Reeves, delivered the first Labour Budget this week since 2010. There is not too much in there that will impact most separating or divorcing couples. The one area that may be of relevance is the increase to the lower rate for CGT from 10% to 18% and for the higher rate from 20% to 24%. This will apply to parties disposing of personal possessions worth more than £6,000 (excluding cars unless they are classic cars which increase in value), shares that are not in a tax-free wrapper, or business assets.  

If you are in negotiations over your separation or divorce and any of these assets have been included, then you should consider whether any calculations need to be revisited in light of these changes. This may be because there has been offsetting (i.e. where one party keeps an asset and the other party keeps a different asset, or assets, of similar value in lieu) and the values may have been calculated net of the inherent CGT.

The CGT rates for residential property are unaffected and remain at 18% for the lower rate and 24% for the higher rate. CGT is only payable on a disposal of a second home though as your main home will usually qualify for principle private residence relief.

It is also important to be aware that transfers of assets between spouses are exempt from CGT up to three years from the end of the tax year of their separation. Furthermore, provided the transfer takes place subject to a Court Order made within financial remedy proceedings (including by Consent), there is no time limit for a transfer between spouses to be exempt from CGT.

If any of the above comments from our expert legal team affect you, please get in touch with us today. For legal advice you can count on, Think Hegarty.