What has the Chancellor delivered?
Today, the Chancellor of the Exchequer, Rachael Reeves, has delivered the first Labour budget for 14 years ending weeks of speculation as to the likely impact on business, workers, investors, property owners and retirees.
The much debated and variously disputed figure quoted as needing to be found to plug a ‘black hole’ in public finances meant that no sector was feeling safe. Most commentators forecast tax rises, with employers NI and inheritance tax being likely targets, but as ever, the devil is in the details:
Autumn budget 2024 highlights
National Insurance contributions
As predicted, employers are shouldering changes to NI which will account for a huge increase in tax revenue, estimated in the region of £25 billion per year (more than half of the total tax-raising measures announced). Employers will have to take on changes to both the rate of employers NI, and the earnings thresholds from which it is paid, however, some of this impact is in effect reversing the reductions announced in the last Conservative budget.
Employers’ NI will increase by 1.2% to 15% from April 2025, and the earnings threshold at which employers will pay NI is being reduced to £5,000 from £9,100.
The employment allowance increases from £5,000 to £10,500 for small business employers.
Inheritance tax thresholds (IHT)
IHT was another area heavily tipped to be a target for the Chancellor and in the end, it appears that she has taken a less aggressive stance than was speculated. Inheritance tax is only paid on 6% of estates and is a hugely complex tax subject with myriad allowances, special rules and rule-tinkering over the years.
The thresholds will remain the same at £325,000 basic allowance, rising to £500,000 to include property, and to £1 million on an estate of the latter deceased spouse in a married couple.
Thresholds were frozen until 2028 and have been extended to 2030.
The big change concerns inherited pension funds, which were previously exempt from IHT and will now be brought within the qualifying estate.
Two billion pounds will be raised from reforming tax reliefs on business and agricultural assets passed on through deceased estates and will now be subject to IHT of 20%.
Capital gains tax (CGT)
There will be sighs of relief amongst landlords and others as the CGT rates on additional property sales have not changed and remain at 24%.
Shareholders will be less happy, however, as CGT due on selling shares will increase from 10% to 18% at the lower rate and from 20% to 24% at the higher rate.
Lifetime asset disposal relief allowance will be maintained at £1 million.
Corporation tax
Taxable business profits of more than £250,000 will remain at the rate of 25% during this parliament.
Research & development tax relief
R&D tax relief is to be maintained at current rates.
Personal taxes, National Insurance and wages
There are no changes to rates of income tax, or NI that currently apply to individuals.
There’s no extension to the freeze on personal income tax allowances as of 2027/28 and the rates will be reviewed in the 2028/29 tax year in line with RPI.
The minimum wage is to increase. Workers over the age of 21 will receive an increase of 6.7% to £12.21 per hour. The Chancellor also announced a move to a single rate of minimum wage, scrapping the lower rate paid to under 21s. This gap will be closed gradually with a 16.3% increase announced today for 16-21 year-olds bringing the hourly rate for 16/17 to £7.55 and for 18-20 up to £10 per hour.
The state pension will retain the triple-lock guarantee, increasing by £470 next year (4.1%).
Business Rates
In a bid to support the beleaguered retail sector, the Chancellor announced a 40% increase in business rates relief up to a cap of £110,000 with new lower rates to be announced from 2026/27 onwards.
Stamp duty
Stamp duty will increase by 2% to 5% on second homes and investment properties to apply from 31st October 2024.
There will be no increase in stamp duty on second properties.
Transport
Fuel duty has been frozen for a further year, and the government will maintain the 5 pence per litre cut in fuel duty announced by the previous government following Russia’s invasion of Ukraine.
In the air, passenger duty will increase by £2 per passenger for each economy short-haul flight.
You might want to cancel your Gulfstream order as private jet usage just got more expensive with an increase of 50% up to £450 per passenger per flight!
At the other end of the scale, the £2 bus fare discount will not be extended beyond the end of the year, however, the new levy will be £3 per journey which is lower than some feared.
Tobacco
Tax on tobacco products to increase by 2% above inflation and by 10% on hand-rolling tobacco and a new ‘Vape tax’ is on the way.
Alcohol
Alcohol duty will rise in line with the Retail Prices Index (RPI), however, the tax on draught beers and other draught drinks sold in pubs and hospitality will reduce by 1.7% on current rates. The tax on sugary soft drinks will increase with the higher RPI measure of inflation.
Non-doms
Non-domiciled in UK relief will be abolished from 2025 meaning that non-UK nationals will have to pay tax on the money they earn whilst living in the UK to HMRC.
Private education
An election manifesto promise that’s long been on Labour’s hit list. Private school fees will become subject to VAT from 2025 and private schools will also lose their business rates relief as charities.
Where’s all the money going?
The point of this tax-raising is to fund, amongst other things, a substantial programme of capital investment. Projects announced included transport infrastructure, schools, the NHS, green technologies, life sciences and to bring things down to a very real and everyday level, pot-holes…
Rackham’s Accountants are always happy to discuss the impacts of any fiscal changes on your business. Please call us on 01482 631700 or use our contact form https://www.rackhamsaccountants.co.uk/contact-the-team/
The information given does not constitute financial advice and was correct at the time of publication.
