Budget 2024 in review – Mark Pearson

In the first Autumn statement under the new Labour government, there was much speculation in advance as to the level of tax increases we would see. This was all despite an election manifesto not to increase Income tax, VAT, National insurance and Corporation tax.

However, with a ‘black hole’ of £22bn inherited from the previous Conservative government, measures have been taken by Rachel Reeves to try to steer the country’s finances back on track, with Employers bearing the brunt of the tax rises.

Some of the major points are:

Employers National Insurance

Employers National Insurance is the area that the Chancellor is hoping to generate the most revenue from, an increase from 6 April 2025 from 13.8% to 15%. The reduction in the threshold from £9,100 to £5,000 means that Employers will be paying a greater amount for employing individuals. Smaller businesses were given some form of relief with the employment allowance of £5,000 being increased to £10,500.

Employees will not be directly affected by increases in National insurance, but I feel the additional burden on the employer is going to be another consideration when contemplating pay rises for staff. This will lead to less money to be spent in the economy.

Capital Gains Tax

Capital Gains Tax increases from the current 10% for basic rate taxpayers to 18% and higher rate taxer payers from 18% to 24%. This matches the existing rates for property which will stay the same.

Business Asset Relief goes up to 14% with effect from 6 April 2025. The non Business Asset Disposal Relief rate goes up from 30 October 2024.

Inheritance Tax

Both business property relief and agricultural property relief are due to be reformed from 6 April 2026 with 100% relief for the first £1 million of combined assets and 50% relief thereafter.

Relief for shares not listed on a recognised stock exchange such as AIM has been halved to 50% from 6 April 2026.

Unspent pension pots (including death benefits payable from a pension will be bought into the estate for IHT purposes from 6 April 2027.

VAT

From 1 January 2025 VAT will be charged on Private school fees. Seemingly with more and more bursaries on offer, will the additional 20% be a deterrent?

Stamp Duty Land Tax

With effect from 31 October 2024, the stamp duty charge on second homes will increase to 5%.

However, some of the taxes that were not attacked in the Autumn statement but time will tell if these are impacted in the future:

• Corporation tax paid by businesses with profits over £250,000 stays at 25% until the next election
• Many thought that the pension allowance of £60,000 may be impacted but the expected change in tax relief was not announced
• Personal Tax thresholds are frozen until 2028. From April 2028 these will then be unfrozen and increase with inflation
• Fuel duty is frozen until next year which is welcome news to many businesses, especially those with high distribution costs

Interestingly, the government has pledged to recruit an additional 5,000 compliance and debt management staff, with investment to be made into HMRC dated systems. I cannot help but feel that if the existing staff went back into the office, the level of service may be better than the current state of affairs.

With such a large deficit to fill, the new Labour government has hit employers hard with the changes in Employers national insurance and an increase in CGT may mean further consideration is made before assets are disposed of.

Hopefully the chancellors measures will be enough to get the UK economy back on track but I worry for future generations if the right investment is not made.

If you would like to discuss any of the points in more detail, do contact me in the usual way.