Key Speculations Addressed

1.       Pension Tax Reliefs: There were rumours that a flat rate tax relief of 20% or 30% for pensions would be introduced. This speculation was unfounded.

2.       Tax-Free Cash: There was talk that tax-free cash allowances might be removed or reduced, which caused concern among many. However, this was unfounded.

3.       Capital Gains Tax (CGT): Speculation about aligning CGT rates with income tax proved to be untrue. However, changes were made to CGT, which we have outlined below.

Major Tax Changes

1. Pensions and Inheritance Tax

– Inheritance Tax (IHT) thresholds were previously frozen until 2028, this has now been extended to 2030.

– Starting from April 2027, pensions will now be included in your estate for IHT purposes.

– From April 2026 the first £1m of combined businesses and agricultural assets will continue to attract no inheritance tax at all, but for business assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%.

2. Capital Gains Tax

It’s no surprise that the Capital Gains Tax (CGT) was targeted, with the following changes taking effect from 30 October 2024:

• The lower rate of CGT being raised from 10% to 18%
• The higher rate of CGT being raised from 20% to 24%
• CGT on the sale of residential property will remain at the lower rate of 18% and the higher rate of 24%

3. Income Tax

The current income tax and national insurance thresholds had been frozen from 2021 until 2028 under the previous government. Rachel Reeves announced in Wednesday’s budget that she would not be extending the income tax threshold freeze and that after 2027/28 the thresholds would continue to be uprated with inflation.

Budget Changes for Businesses

1. Corporation Tax

– Corporation tax will now be capped at 25%.

2. Business Reliefs

– Business rates for retail, leisure, and hospitality businesses will decrease from 75% to 45%.

– Business Asset Disposal Relief (BADR):

– Maintained at £1 million;

– Remains at 10% for this year on all gains on qualifying assets;

– Increased to 14% from 6 April 2025 and to 18% from 6 April 2026.

– The lifetime limit for Investors’ Relief will decrease from £10 million to £1 million.

– Relief for business property will be reduced to 50% for shares not listed on recognised stock exchanges from 100%.

3. National Insurance

– The employer’s national insurance contribution rate will rise from 13.8% to 15% starting April 2025.

– The secondary threshold, where employers begin paying national insurance, will drop from £9,100 to £5,000.

– The employment allowance will increase from £5,000 to £10,000, meaning 65,000 businesses will not pay any national insurance next year, while over a million others will pay the same or less than before.

Budget Changes for Individuals

1. Private School Fees

– A 20% VAT on private school fees will be implemented in January 2025.

2. Stamp Duty

– The Additional Homes Stamp Duty Land Tax (SDLT) will rise from 3% to 5%, effective 31 October 2024.

3. Non-Dom Tax Regime

– The current non-domiciled tax system will transition to a residence-based system. Individuals opting in will not have to pay UK tax on foreign income during their first four years of residence in the UK.

4. Fuel Duty

– The existing 5p cut to fuel duty will be maintained for this year and the next.

If you have further questions about the announcements made in this year’s budget or need clarification, please get in touch with our team at 01733 355 120.