‘The £40bn Tax Bomb’
The 2024 Autumn Budget was one of the most eagerly – and anxiously – awaited in decades. Chancellor Rachel Reeves warned that tax increases were unavoidable, as the new government plans to invest heavily in public services like the NHS and schools, while also addressing a £22 billion shortfall they say was left by the previous government. Everyone expected that tax hikes were coming; the main question was who would pay for them.
Unfortunately, business owners, especially employers, will feel the biggest impact. A major increase in Employers National Insurance will account for about half of the £40 billion in tax rises announced. This doesn’t even include the 6.7% hike in the national minimum wage. Farmers, in particular, may face the toughest challenges.
As usual, we’ve taken time to analyse the budget and highlight what we believe are the most important points for our clients. This is just a brief overview of a much larger budget; full details are available online at gov.uk.
Key Changes
- Employers National Insurance Contributions: Starting April 6, 2025, these contributions will increase by 1.2 percentage points to 15%. The threshold at which employers start paying has dropped from £9,100 to £5,000 per year.
- Capital Gains Tax: Effective immediately (as of October 30, 2024), the main rate will rise from 20% to 24%. The rate at which a basic rate taxpayer pays CGT will increase from the starting rate of 10% to a starting rate of 18%. Business Asset Disposal Relief (formerly Entrepreneurs Relief) will also increase from 10% to 14% in April 2025, and 18% in April 2026.
- Inheritance Tax Changes: Starting April 2027, unused pension funds and death benefits will be included in taxable estates. AIM Investments will no longer be fully exempt from Inheritance Tax if held for over two years, and significant changes will be made to reliefs for agricultural and business properties starting April 2026.
- National Minimum Wage: From April 2025, the minimum wage will rise to £12.21 per hour for workers aged 21 and over, a 6.7% increase. For 18-21 year olds this is now £10 per hour, and £7.55 per hour for under 18s. This will put more pressure on employers.
- Electric Vehicles (EVs): EVs remain the best option for company cars, with slight increases in benefit-in kind rates leading up to 2030.
- Double-Cab Pickups: A significant change that hasn’t received much media attention is that double-cab pickups will now be treated as company cars instead of commercial vehicles. This will remove some tax benefits and could significantly increase taxable amounts for employees who use these vehicles.
Silver Linings
- Corporation Tax: There are no major changes to Corporation Tax rates, which remain at 25% for larger profits and 19% for profits under £50,000. This is a small relief for business owners.
- Employment Allowance: From April 2025, the Employment Allowance will increase from £5,000 to £10,500, available to all eligible employers.
- Personal Tax Thresholds: Starting in April 2028, personal tax thresholds will no longer be frozen and will increase annually with inflation.
- Small Business Rates Relief: This will continue, and the small business multiplier will be frozen through 2025/26.
- Fuel Duty: The tax on petrol and diesel will remain frozen, with a temporary 5p cut extended for another year, benefiting motorists and transport companies.
Other Notable Changes
- Legislation is being introduced to address what the government sees as unfair tax advantages for umbrella companies starting in April 2026.
Stamp Duty: As of October 31, 2024, higher rates for additional properties will rise from 3% to 5%, but there are no changes for primary residences.
- VAT Threshold: The threshold for mandatory VAT registration remains at £90,000.
- Private School Fees: Starting January 2025, VAT will be added to private school fees, raising costs by 20%.
- The government is revising its approach to non-UK domiciled individuals regarding inheritance tax starting in April 2025.
- The Furnished Holiday Lettings Regime will be abolished from April 2025.
- The government is moving forward with Full Expensing tax relief on leased assets, allowing more flexibility for businesses investing in new equipment.
- Making Tax Digital: The rollout will continue for businesses with varying income levels over the next four years, with all businesses with a turnover of under £20,000 set to go to digital by 2028.
- HM Revenue and Customs will receive more resources to tackle non-compliance, and there are plans to improve customer service.
- Finally, there’s a minor reduction in Alcohol Duty on draught products, but any hope of lower drink prices seems unlikely.
* This overview is for information purposes only and does not serve as professional advice. If you have questions about anything in this document, please contact our team who will be happy to assist.
