Following yesterday’s UK Autumn Budget 2024, we set out below a key summary of the changes introduced by the chancellor, Rachel Reeves
As with all budgets, the implications are not always fully clear for some months, especially in terms of business confidence and often the property market. What is clear is that the Autumn 2024 budget is likely to have significant implications. As always, our mission is to help our clients with the challenges arising.
Below are the principal increases in the Budget which may affect our clients, in particular, high net worth individuals and/ or those owning UK property and businesses.
BUSINESS TAX CHANGES
- Capital Gains Tax (CGT) – the main rates of CGT were increased, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24%, matching the existing CGT rates on residential land and property which remain unchanged (at 18% and 24% respectively).
- Employer National Insurance Contributions (NICs) – these were increased by 1.2 percentage points to 15%.
PERSONAL TAX CHANGES
Inheritance Tax (IHT)
- Freezing the Nil-Rate Band and Residence Nil-Rate Band – the Government has frozen the current nil-rate band and residence nil-rate band until April 2030. This means the tax-free threshold for estates will remain at £325,000, and the additional allowance for main residences will stay at £175,000.
- Changes to Business Property Relief and Agricultural Property Relief – from April 2026, the first £1 million of combined business and agricultural assets will continue to be exempt from IHT. However, for assets exceeding £1 million, a 50% relief will apply, resulting in an effective IHT rate of 20%.
- Inheritance Tax on Inherited Pensions – from April 2027, inherited pension funds will be subject to IHT. This means that when you inherit a pension pot, it could be subject to inheritance tax, depending on the value of your estate.
It’s important to note that these changes can have significant implications on what you will be able to pass down without a significant tax burden in future.
Capital Gains Tax (CGT)
The main rates of CGT were increased, with the lower rate rising from 10% to 18% and the higher rate from 20% to 24% in line with existing CGT rates on residential land and property.
Stamp Duty (SDLT)
The Budget introduced several changes to SDLT :-
- higher rates of SDLT on additional dwellings and on purchases by non-natural persons were increased from 3% to 5%.
- the flat rate which can apply to companies buying dwellings for over £500,000 increased 15% to 17%
Whilst the 2% surcharge for non-UK resident buyers remains unchanged, this can apply on top of the 5% surcharge for “higher rates” transactions and on top of the 17% flat rate
There was no change in the position on SDLT thresholds which will fall back down to “normal” after 31 March 2025:-
- the threshold at which “basic” SDLT applies of £250,000 will drop back to £125,000.
- the first time buyer relief upper price limit of £625,000 will drop back to £500,000 and the maximum amount free of SDLT under this relief will drop from £425,000 to £300,000
Non-doms
The UK government announced plans to abolish this status in the Autumn Budget 2024. This means that from April 2025, UK tax residents will be taxed on their worldwide income and gains, regardless of their domicile.
This change will have significant implications for individuals who have previously benefited from the non-domicile regime, including those who have remitted foreign income and gains to the UK.
POSSIBLE IMPLICATIONS FOR OUR CLIENTS
The below are our initial thoughts. We will update our clients over the next weeks and months relating to the trends we are seeing in the instructions we receive and opportunities and risks which emerge.
CGT implications
- Changes to Capital Gains Tax – higher tax rates on capital gains, potentially affecting entrepreneurs and investors. Businesses and individuals should review their investment strategies and consider tax-efficient structures to mitigate the impact of increased capital gains tax.
- Business Asset Disposal Relief (BADR) – changes to the BADR rules will affect the tax treatment of business asset disposals. Businesses should seek professional advice to understand the new rules and optimize their tax planning strategies.
Implications for Wealth Planning and Inheritance Tax
- Inheritance Tax Thresholds – while the government has maintained the current inheritance tax thresholds, these have been static for some time and increased cost of living will doubtless continue to erode the value of these allowances over time. High-net-worth individuals should review their estate planning strategies to minimise inheritance tax liabilities.
- Changes to Agricultural Property Relief and Business Property Relief – modifications to these reliefs could impact the tax planning strategies of landowners and business owners. Individuals and businesses should seek expert advice to understand the new rules and optimize their tax planning.
- Increased monitoring and collaboration – we will be working closely with other advisors to help our clients take the opportunities available to reduce IHT liability ahead of the incoming changes.
Repercussions for Employment Law
New employee protection came into force earlier this month, in addition to the Budget changes.
- Higher employer costs – could lead to increased pressure on businesses to control labour costs, potentially affecting employee benefits, pay, and working conditions. Employers should review their employment contracts and policies to ensure compliance with changing legal requirements and to mitigate potential employment law risks.
- Hiring and retaining staff – employers should carefully consider their workforce planning strategies and ensure compliance with employment law obligations, such as redundancy procedures and discrimination law.
CONCLUSION
The Autumn Budget 2024 has significant implications for businesses, individuals, and the employment market. To navigate these changes effectively, it is crucial to seek expert legal advice. Our firm is well-equipped to assist clients in understanding and addressing the legal and tax implications of these changes.
Key contacts for any immediate concerns or queries :
Corporate – https://www.branchaustinmccormick.com/team/harender-branch/
Employment – https://www.branchaustinmccormick.com/team/elliot-hammer/
Private client – https://www.branchaustinmccormick.com/team/miriam-spero/
Property – https://www.branchaustinmccormick.com/team/tania-austin/
