AUTUMN BUDGET 2024

Chancellor Rachel Reeves presented her first budget to Parliament on 30 October 2024. Key changes were as follows:

• Increase in the rate of Employers’ National Insurance to 15% from April 2025, together with a reduction in the threshold from which it is payable, offset by an increase in Employment Allowance
• Increase in capital gains tax on sales of shares, with immediate effect
• Increases in Stamp Duty Land Tax
• Confirmation that VAT will apply to school fees with effect from January 2025
• Increases in National Minimum Wage from April 2025
• Undrawn pension funds to be subject to Inheritance Tax from April 2027

Income tax

Tax-free personal allowance remains unchanged at £12,570. The allowance is reduced by £1 for each £2 of income above £100,000; it is lost completely when income reaches £125,140.

Income after personal allowance is taxed at the following rates:

£1 to £37,700               20% (Dividends 8.75%)
£37,701 to £125,140   40% (Dividends 33.75%)
Above £125,140           45% (Dividends 39.35%)

High Income Child Benefit Charge (HICBC)

If a spouse (or civil partner) earns more than £60,000 then HICBC is payable on child benefit received, at the rate of 1% of CB for every £200 of income above the threshold. It is fully clawed back when income reaches £80,000.

Capital Gains Tax (CGT)

The rate of CGT on disposals of assets other than residential property (for example stocks and shares) is increased to 18% within the basic rate band and 24% beyond that level. This brings the rate into line with that on disposals of residential property.

For business owners qualifying for Business Assets Disposal Relief, the rate of CGT is increasing from 10% to 14% for disposals made after 6 April 2025, and to 18% for disposals made after 6 April 2026 for the first £1million of qualifying disposals.

National Living Wage and National Minimum Wage (NLW and NMW)

The NLW payable to employees aged 21 and over rises to £12.21 per hour from April 2025. The NMW for ages 18 to 20 rises to £10 per hour, and the NMW for ages 16-17 rises to £7.55 per hour.

Employers National Insurance

• Increases from 13.8% to 15% from April 2025
• Threshold at which it starts is reduced to £5,000
• Employment Allowance increases to £10,500

Making Tax Digital (MTD) for Income Tax

Businesses will be required to keep digital records and send a quarterly summary of their business income and expenses to HMRC from April 2026. This will apply to sole traders and landlords with combined income of more than £50,000, reducing to £30,000 from April 2027.

Tax Regime for Furnished Holiday Lets (FHL)

The special rules for FHL are abolished from April 2025, from when FHL profits will be taxed in the same way as other rentals.

VAT

The registration threshold remains unchanged at £90,000, and the standard rate remains at 20%.
School fees will be subject to the standard rate from January 2025.

Corporation tax

Corporation tax rates and thresholds remain unchanged:

Main rate          25% (profits above £250,000)
Small profits    19% (profits up to £50,000)
Marginal rate   26.5% (profits between £50,000 and £250,000)

The thresholds are shared equally between companies in a group and those controlled by the same persons.

Pensions

Annual allowance remains at £60,000 (applies to combined individual and employer contributions).
From April 2027 undrawn pension funds will be subject to IHT on death.

Inheritance tax (IHT)

Nil rate band is frozen at £325,000. Residence nil rate band remains at £175,000. A married couple or civil partnership will therefore not pay IHT if their estate is less than £1 million. The residence nil rate band is tapered if the estate exceeds £2 million.

Residence and domicile

From April 2025 all UK residents will be taxed on their worldwide income and gains. However 100% relief will be available to individuals in their first 4 years of UK residence. An individual claiming this relief will sacrifice their personal allowance and CGT annual exemption.

Individuals resident in the UK for at least 10 out of the last 20 tax years will be subject to IHT on both UK and non-UK assets.

Stamp Duty

The main stamp duty threshold is reduced to £125,000, and the first-time buyers threshold to £300,000.
The higher rate of stamp duty payable by purchasers of second properties increases from 3% to 5% above the standard residential rates with effect from 31 October 2024.

If there is anything you would like to discuss please contact Don Fisher.