On the 30 October 2024, Rachel Reeves delivered the first Labour budget in 14 years. The months prior to the budget was filled with uncertainty, with Labour confirming in their manifesto to not increase income tax, VAT or national insurance. This led to the assumption that they would target capital gains tax and inheritance tax.
The below aims to set out some of the changes that will impact businesses going forwards.
Employers National Insurance
From a business perspective there have been some significant changes. Firstly, employers’ national insurance is set to rise from 13.8% to 15.0% from 6 April 2025, as well as the threshold at which employers’ national insurance will begin to be charged falling from £9,100 to £5,000. This does not directly affect the employee but for businesses will lead to higher costs which they could look to pass onto employers in the form of smaller pay rises. Otherwise, profitability will be affected.
There is a positive in the form of the rise in the employers’ allowance, this will rise from £5,000 to £10,500 per annum from 6 April 2025 for applicable businesses and could result in more smaller businesses falling outside the scope of employers national completely.
Capital Gains Tax
As we might have been expected, the rates of capital gains tax increased, and from 30 October 2024 are now at 18% and 24% respectively, up from the previous 10% and 20%, this brings the tax in line with the residential property rates.
Business asset disposal relief (BADR) will continue to be available, with the lifetime allowance still remaining at £1m of gains. The rate of BADR however will change, this will remain at 10% until April 2025, increasing to 14% to April 2026 and then increasing to 18% in the 2026/27 tax year.
There has been no change to gift holdover relief which will continue provide flexibility in the gifting of assets to the next generation.
Inheritance Tax
There were some substantial changes in Inheritance Tax, firstly through unused pension funds and death benefits being included as part of the estate for Inheritance Tax from 6 April 2027. This will require substantial planning to review each individual’s position individually.
Another element of the budget was the reform of both Business property relief (BPR) and Agricultural Property Relief (APR). Where previously all qualifying assets would have attracted 100% relief there is now a cap of £1m of qualifying assets. Any qualifying assets over this will attract a 50% relief. This will provide an effective tax rate of 20% on these assets where previously there would have been no liability.
Further to this, the nil rate band (£325,000) and the residence nil rate band (£175,000) will continue to be frozen until the 2029/30 tax year.
Corporation Tax
Corporation tax rates will remain at 25% for the main rate with the small profit rate remaining at 19%. Profits made between the small profits threshold of £50,000 and the main rate threshold of £250,000 in a year will continue to be subject to the marginal rate.
The thresholds are pro-rated for periods of more or less than one year and divisible by the number of associated companies.
This article summarises some of the significant changes from the Autumn budget. A full summary of the changes can be found using the link below.
Autumn Budget Summary 2024 | Brochures | Larking Gowen
If you have any further questions on the changes noted above or any other matters, do not hesitate to contact me on 01473 925030 or Jamie.Steel@larking-gowen.co.uk.
Jamie Steel, Accountant at Larking Gowen and ISSBA Treasurer
