The 2024 Autumn Budget outlines several significant fiscal changes that will impact individuals, businesses, and various sectors of the economy. Here are the key takeaways:
1. Income and Personal Taxes
No Change to Current Tax Rates: In line with pre-election promises, there will be no changes to the existing rates or bands for income tax, Class 1 National Insurance (NI), Class 4 NI, or dividends.
Personal Tax Thresholds to Increase: The freeze on personal tax thresholds will end in April 2028. From that point, the thresholds will increase annually in line with CPI (Consumer Price Index) inflation.
Company Car Tax: For employees using company-provided zero-emission and electric vehicles, the benefit-in-kind tax rate will increase by two percentage points per year from 2028-2029 and 2029-2030, reaching 9% by the 2029-2030 tax year.
2. Domicile Status
Domicile Status Changes: The special treatment of domicile status for income tax and capital gains tax (CGT) will end, as previously announced.
3. Business Taxes
Secondary Class 1 National Insurance: The rate of secondary Class 1 NI will increase to 15% from April 2025. The payment threshold will also be lowered to £5,000 (approximately £96.15 per week).
Employment Allowance: To offset the impact on smaller employers, the employment allowance will rise to £10,500, more than double the current amount.
VAT on Private School Fees: The planned application of VAT to private school fees will proceed as previously announced. Further details will be provided soon.
4. Capital Taxes
Capital Gains Tax Rates: The two-tier system of CGT rates will remain, but the rates will increase. The rates will rise to 18% for general assets and 24% for residential property. The trust rate will also increase to 24%. These changes will apply to disposals made on or after 30 October 2024.
Carried Interest Tax: The rate of tax on carried interest will rise to 32% from April 2025, with further reforms expected.
Business Asset Disposal Relief: The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% for disposals made on or after 6 April 2025 and to 18% for disposals made on or after 6 April 2026.
Lifetime Limit for Investors’ Relief: The lifetime limit for Investors’ Relief will reduce from £10 million to £1 million for disposals made on or after 30 October 2024.
Inheritance Tax on Inherited Pensions: Inherited pensions will be subject to inheritance tax starting in April 2025.
Agricultural and Business Property Relief: The relief for agricultural and business property will be less generous. The first £1 million of combined agricultural and business property will continue to receive 100% relief, but after that, the relief rate will drop to 50%. This applies to shares that are not listed on recognized stock exchanges, such as AIM.
5. Other Taxes
Stamp Duty Land Tax Surcharge: The stamp duty land tax surcharge on purchases of additional dwellings will increase from 3% to 5% starting 31 October 2024. The rate for companies and other non-individual buyers of residential properties over £500,000 will rise to 17%.
Conclusion
The 2024 Labour Budget introduces a series of tax changes across personal, business, and capital taxes. Key changes include the unfreezing of personal tax thresholds in 2028, an increase in CGT rates, and the application of VAT to private school fees. There are also adjustments to business taxes, including an increase in secondary NI rates and changes to reliefs for business and agricultural properties. These measures are set to take effect over the coming years, with some changes applying immediately, and others starting in 2025 or 202