UK Autumn Budget 2024: Our analysis

Today, Chancellor Rachel Reeves delivered her first Budget to the nation.

Rachel Reeves Budget unveiled plenty of expected and some unexpected changes. With the need to balance raising taxes, increase public spending and investment, we look at whether the new Government stuck to its manifesto pledges and what the Autumn 2024 Budget announcements covered.

We’ve listened and analysed Rachel Reeves Autumn Budget Statement and below we explore the impact of the UK Autumn Budget 2024 for individuals, the self-employed, contactors, landlords and businesses.

Understanding the UK Autumn Budget 2024: Key insights and impacts on taxpayers

Capital Gains Tax (CGT)

One of the biggest tax rises of the Autumn Budget is the announcement of a significant increase in CGT, with the lower rate increasing from 10% to 18% and the higher rate increasing from 20% to 24% for disposals made on or after 30 October 2024.

Business Asset Disposal Relief (BADR) which reduces the effective CGT rate to 10% on the first £1m of gain will remain at 10% this year. However, it will increase to 14% for disposals made on or after 6 April 2025 and to 18% for disposals made on or after 6 April 2026 for the first £1m.

CGT rates on residential property will be maintained at 18% and 24% respectively.

CGT rates on carried interest will also rise to 32% from April 2025, and from April 2026, the Government will deliver further reform to ensure that the specific rules for carried interest are simpler, fairer and better targeted.

Employers National Insurance

National Insurance Contributions are paid by workers and the self-employed on earnings and profits, and by employers on top of the wages they pay out.

Whilst the Labour government pledged not to raise contributions for "working people" it was clear before the Autumn Budget, that this statement only covered the employee element, rather than the sum paid by employers.

Employers pay National Insurance on a worker’s earnings above £175 a week. As expected, Rachel Reeves announced an increase to employer’s National Insurance Contributions from 13.8 per cent to 15 per cent from April 2025.

However, there was a reduction to the secondary threshold, (the level at which employers start paying NI on an employee’s salary). The new threshold will now be £5,000 (down from £9,100) from April 2025.

It was anticipated that Reeves could change the rules so employers have to pay NI on pension contributions. Thankfully, no changes in this area were announced in the Budget.

Employment Allowance

Employment Allowance helps eligible employers to reduce their annual National Insurance cost.

Under the rules now, a business will pay less Class 1 National Insurance at every payroll until it has reached £5,000 or until the tax year ends (whichever is sooner). To support small businesses it was announced, the government is increasing the Employment Allowance from £5,000 to £10,500 and removing the £100,000 threshold, expanding this to all eligible employers. This means that 865,000 employers will pay no NICs from April 2025

You can claim Employment Allowance if you’re a business or charity (including community amateur sports clubs) and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.

Key insights and impacts on taxpayers

Income tax

After years of freezes on income tax and NI thresholds, The Chancellor announced that personal tax thresholds and National Insurance will rise in line with inflation from 2028/29, ending many years of ‘fiscal drag’ for employees and the self-employed.

The current personal allowance threshold for tax free earnings is £12,570.

Inheritance tax (IHT)

Currently, IHT is applied at a rate of 40% on estates valued above £325,000 and the previous Government had frozen the threshold until 2028. The Chancellor announced that this freeze will be extended for a further two years until 2030. This means as the value of property and estates rise, more people will be dragged into paying IHT.

One surprise on IHT was the announcement that inherited pensions will fall into IHT from April 2027, meaning pensions passed on will be subject to IHT. At the moment, a spouse’s pension pot can be inherited without any tax.

Individuals should review their retirement planning as it may be better to access pensions earlier to avoid some IHT.

AIM shares

AIM shares’ Business Property Relief will reduce from 100% to 50% in April 2026, resulting in 20% IHT exposure and reducing their tax planning appeal

Pensions

The major change announced today was that pensions passed on will be subject to IHT from 2027.

However, Reeves didn’t announce that they would apply employer NI to employer contributions on pensions as widely predicted.

No announcements were made changing pension tax relief or the tax free lump sum that retirees can withdraw from their pension. There is currently a maximum limit of £268,275 that can be taken as a tax free lump sum at the age of 55 upwards (set to rise to age 57 in 2028).

Agricultural Property Relief

For farmers and landowners, the Budget didn’t bring good news as the Chancellor announced changes to Agricultural property relief. The new plans mean that from April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all. However, assets over £1 million will get a 50% relief, with an effective rate of IHT at 20%.

Stamp Duty Land Tax (SDLT)

An area that will hit property investors, second home owners and landlords was the announcement that the SDLT surcharge for second homes, known as the higher rate for additional dwellings would increase by 2% to 5%. This change will come into effect from 31st October, 2024, meaning the increase cannot be avoided.

Contracts exchanged before 31 October 2024 will not be impacted by these higher rates, even if completion occurs after this date. This transitional rule is crucial for buyers currently in the purchasing process.

Note: These changes apply to England and Northern Ireland only; Scotland and Wales have separate transaction tax regulations.

Non-domiciles

Rachel Reeves confirmed she would fulfil the promise made in the election manifesto to remove the "outdated concept" of domicile from the tax system from April 2025. She announced that a simpler residence-based scheme with considerations for workers coming to the UK on a temporary basis will be introduced.

Offshore trusts will no longer be able to be used to shelter assets from IHT, 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.

There will be some concessions, with the extension to the temporary repatriation facility, which will allow non-doms to bring their historic income and gains to the UK at a reduced rate of tax.

For ex-pats transitioning back to the UK, there is an opportunity to take advantage of the generous four-year foreign income and gains (FIG) regime.

Settlor-interested trusts will lose tax protection on income and gains from April 2025 unless qualifying for the new 4-year FIG regime.

Fuel duty

Fuel duty has been frozen for another year meaning that business owners that run large fleets and commercial vehicles will breathe a sigh of relief after speculation that the 5p cut would be scrapped at the same time as pushing duty up.

Electric vehicles and charging points

Businesses acquiring zero-emission cars or installing electric vehicle charge-points will get an extension on the availability of the 100% first-year allowance for expenditure on zero-emission cars and the 100% first-year allowance for electric vehicle charge-points. This extension will be to 31 March 2026 for Corporation Tax purposes and 5 April 2026 for income tax purposes.

Incentives for electric vehicles in company car tax will be maintained until 2028.

Business rates

Chancellor Rachel Reeves has announced a 40% relief on business rates for the retail, hospitality and leisure industry in 2025/26, up to a cap of £110,000 per business. Retail properties have qualified for business rates relief since 2020 and benefit from a 75% discount capped at £110,000 per business. This is due to expire in April 2025. However, the change from a 75% discount to 40% still means that many businesses will see their business rates rise.

VAT on private schools fees

VAT on private school fees will be introduced from January 2025.

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

The Chancellor unveiled plans prior to Budget day for a significant pay rise for workers by announcing the 2025 national minimum wage increases. The Chancellor confirmed that the Government would accept the Low Pay Commission recommendation to increase the National Minimum Wage by 6.7% from April 2025.

This announcement will see the National Minimum Wage for those over the age of 21 rise from £11.44 to £12.21 per hour. For workers under 21 the National Minimum Wage will rise from £8.60 to £10.00 per hour. Apprentices will see an hourly pay increase from £6.40 to £7.55 (an 18% increase).

The Government see this as a step towards aligning the National Minimum Wage and National Living Wage to create a single wage rate over time.

This is great news for lower paid employees struggling with the cost of living. However, these rises are well above what was expected to be announced.

These increases are likely to be difficult for many SMEs and businesses to afford, especially in sectors with high staff costs such as hospitality and tough markets such as retail. The increases could mean businesses employing less people, limiting future investment or in the worst cases, threatening business viability.

Business tax roadmap

The Governments business tax roadmap is a commitment set out by the new Labour Government to cap corporation tax at 25% for the duration of parliament and to retain capital allowances full expensing. This is designed to provide a degree of stability and certainty for businesses in coming years.

Other changes to be aware of from April 2025 that were previously announced

Below are changes that had been announced in the previous Budget that will still take effect from April 2025.

Furnished Holiday Letting (FHL) regime

Holiday let owners will lose favourable tax reliefs when the Furnished Holiday Letting (FHL) regime is abolished from April 2025. This means all income from property (FHLs and residential properties) will be treated the same.

The holiday let changes will take effect from 6th April 2025 for those paying income tax, and 1st April 2025 for those paying Corporation Tax. The FHL tax regime will be abolished on these dates.

Contact us for more detail on the changes happening.

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)

EIS and VCT schemes have now been extended by ten years to 5 April 2035.

Summary

After years of spending cuts and a fiscal black hole to fill in the economy, the Chancellor had some tough decisions to make in the Budget.

Some announcements were expected, but others were not. The self-employed and business owners will need to plan for these changes and other previous announced changes prior to 6th April 2025. Now is the time to begin tax planning for 2025.

If you are concerned about any of today’s announcements or you need more help and advice relating to the Autumn Budget announcements, contact dns accountants today on 03330600706 or email on enquiry@dnsaccountants.co.uk.

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