UK Autumn Budget Breakdown
Changes for individuals and businesses, with some taking effect immediately. While some rumoured increases didn’t materialise, entrepreneurs and investors will still see higher tax liabilities in key areas.
Key Measures Impacting Businesses and Individuals
1. Employer NIC Increase
- Effective from April 2025: Employer National Insurance contributions will increase from 13.8% to 15%, with the threshold reduced to £5,000.
- Impact: Adds payroll cost pressure, especially on small and medium businesses, possibly affecting growth and hiring plans.
2. Business Asset Disposal Relief (BADR)
- Effective from April 2025 and April 2026: Relief rate rises from 10% to 14% in April 2025 and further to 18% in 2026, while the £1M lifetime allowance remains unchanged.
- Impact: Aligns closer to CGT rates, potentially reducing the UK’s appeal for entrepreneurs.
3. Capital Gains Tax (CGT) Increase
- Effective from October 30, 2024: CGT rates increase with the lower rate up to 18% and the higher rate to 24%. Residential property rates remain unchanged.
- Impact: Investors may need to adjust strategies as higher CGT rates could impact asset returns. Encouraging using ISAs and SIPPs to reduce CGT, helping individuals grow wealth more efficiently in tax-efficient accounts.
4. Income Tax, VAT, and NIC Allowances Freeze
- Effective through 2028: While individual NIC, VAT, and income tax rates remain the same, allowances are frozen through 2028.
- Impact: The freeze will draw more taxpayers into higher tax brackets over time due to inflation, known as “fiscal drag.” However in 2028 the freeze ends and we will see the allowances increase in line with inflation.
5. Employment Allowance Increase
- Effective from April 2025: Employment Allowance will increase from £5,000 to £10,500, benefiting 865,000 employers with NIC exemptions.
- Impact: This offers critical support for small businesses, helping offset NIC increases.
6. Increased CGT on Carried Interest
- Effective from April 2025: CGT on carried interest will rise to 32%.
- Impact: Private equity and fund managers will face increased tax obligations, potentially influencing investment approaches.
7. Non-Dom Tax Regime Abolition
- Effective from April 6, 2025: Non-dom status ends, transitioning to a residence-based scheme. The Temporary Repatriation Facility is extended to three years.
- Impact: This major shift may impact the UK’s appeal for international investors, with some flexibility provided by the extended repatriation facility.
8. Stamp Duty on Second Properties
- Immediate Effect (October 31, 2024): The stamp duty surcharge on additional properties will increase from 3% to 5%.
- Impact: Higher costs for second homes and buy-to-let investments may impact rental supply and property prices.
Additional Measures from the Finance Bill 2024-25
1. Starting Rate for Savings
- Effective from April 2025: The 0% band on savings income up to £5,000 is retained for 2025-26.
2. Changes for Non-Domiciled Individuals
- Effective from April 2025: Replacement of the remittance basis with a residence-based tax model, along with reformation of Overseas Workday Relief.
3. Inheritance Tax Adjustments
- Effective from April 2025 and 2027 for new inclusions: Fixed nil-rate and residence nil-rate bands extended through 2030, with changes to IHT on pension death benefits effective from 2027. This change could prompt individuals to rethink estate and retirement planning, as more pensions will be drawn into IHT.
4. Corporation Tax
- Effective for 2026 Financial Year: The main rate is maintained at 25%.
5. Energy Profits Levy (EPL) Reform
- Effective November 1, 2024: EPL rate increases to 38%, with a sunset clause extension to 2030.
6. SDLT Surcharge for Second Homes and Companies
- Immediate Effect (October 31, 2024): SDLT surcharge on additional properties and non-natural persons acquiring high-value property raised to 5% and 17%, respectively.
7. Abolition of Furnished Holiday Let (FHL) Tax Regime
- Effective from April 2025: FHL-specific tax reliefs are abolished, with properties now integrated into general property business tax treatment.
8. Air Passenger Duty (APD) and Tobacco Duty Increases
- Effective from 2025-26 and 2026-27 for APD: Tobacco duty will rise by 2% above inflation.
9. Introduction of Vaping Products Duty
- Effective from 2026: New duty on vaping products.
10. Additional Tax Credit for Visual Effects (VFX)
- Effective from April 2025: Enhanced 39% rate for UK film and high-end TV productions.
Consultations and Policy Reviews
- High-Income Child Benefit Charge (HICBC): Simplified reporting and new data sharing to target economic support for households.
- Inheritance Tax on Pension Death Benefits: Unused pension funds to be included in IHT from 2027.
- NIC Relief for Veterans: Employer NIC relief extended for hiring veterans until 2026.
- Research & Development (R&D) Reforms: Adjustment of the intensity ratio for R&D tax relief calculation.
- Carbon Border Adjustment Mechanism (CBAM): Environmental tax on high-carbon imports from January 2027, covering sectors like steel and cement.
Immediate-Effect Changes
Several measures from the Autumn Budget 2024 have immediate effect, including:
- Capital Gains Tax Rate Increases (October 30, 2024)
- SDLT Surcharge for Second Properties (October 31, 2024)
- Energy Profits Levy Reform (November 1, 2024)
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Secondary National Insurance Threshold
From April 6, 2025, the per-employee threshold at which employers become liable to pay National Insurance will reduce from £9,100 to £5,000. This means that employers will start paying National Insurance sooner on lower salaries.
Employment Allowance Threshold Removal
The Employment Allowance increase also includes the removal of the £100,000 threshold, making the allowance available to all eligible employers. As a result, 865,000 employers will pay no NICs next year.
Corporation Tax Small Profits Rate
The government will maintain the Corporation Tax Small Profits Rate and marginal relief at their current levels. This means that 9 out of 10 actively trading companies will have a Corporation Tax rate lower than 25%, ensuring a lower tax burden for smaller businesses.
Annual Investment Allowance
The £1 million Annual Investment Allowance will remain in place, providing businesses with certainty to support long-term investments.
Sector-Specific Funding
Additional funding has been allocated to various sectors, including £1 billion for aerospace, over £2 billion for the automotive industry, and £520 million for the Life Sciences Innovative Manufacturing fund, providing targeted support to key industries.
Innovation Accelerator Programs
The government will extend Innovation Accelerators into 2025-26 to strengthen innovation clusters in the Glasgow City Region, Greater Manchester, and the West Midlands, boosting regional high-potential sectors.
Summary
This budget provides a mix of immediate and phased changes, impacting business operations, investment strategies, and personal taxation. With significant increases in CGT rates, SDLT surcharges, and the abolition of the non-dom regime, these changes reflect a shift towards tax equity and streamlined processes, while maintaining competitive elements like the Temporary Repatriation Facility and new four-year foreign income relief for newcomers.
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