Most of what was said was expected but there will be disappointment from business owners that they will need to stump up more than had been trailed. As well as the rate of employers’ NICs increasing from 13.8% to 15%, the threshold at which the NICs become payable has been reduced from £9,100 to £5,000 as well. The total bill for businesses with these changes is estimated at £25bn per year and, once you add in the increases in the national living wage, it is clear that it is businesses that are being asked to pick up much of the £40bn increase in tax take this time round.
As a sweetener the Chancellor has decided to retain the £1m business asset disposal relief lifetime limit which had been rumoured to be on the way out. There are some changes to the relief with the 10% rate of capital gains within the £1m limit increasing to 14% from 6 April 2025 and 18% from 6 April 2026, but the fact that it is still possible to obtain some tax relief on the sale of a business in the near future will be a relief for many.
There were changes to the headline rates of capital gains tax generally which increased on Budget day (30 October 2024) from 10% to 18% and from 20% to 24%. The rates for residential property have been held and so the rates for all assets other than carried interest have now been aligned – arguably a welcome simplification. Aligning rates with income tax was rumoured so the Chancellor has showed some restraint and the rates are still considered quite low compared to other territories.
Changes to IHT reliefs were widely expected and the Chancellor is on course for a battle with the farming community having made restrictions to agricultural property relief (APR) and business property relief (BPR). From 6 April 2026, the current unlimited 100% relief for qualifying assets will only be available for the first £1 million of combined agricultural and business property. After this threshold has been exceeded, the rate of relief will be 50%. The Government have indicated that, even with this restriction, APR (with the other IHT reliefs that will continue to be available in addition to APR) should be enough to ensure that the average farm is not within the IHT net, but there is sense that there are a lot of arguments to follow about this.
BPR is also being restricted in respect of quoted shares that are not considered to be listed on recognised stock exchanges e.g. AIM shares. The 50% BPR rate will apply to these assets in all circumstances. This was rumoured to be on the way out completely so, again there has been some restraints shown after much concern voiced by the business community.
Other announcements of note include:
- The Corporate Tax Roadmap was published with the Budget documents and it included the expected commitment to cap the corporation tax rate at 25%, maintain the small profits rate and marginal relief at current rates and thresholds; and maintain key features as such as full expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box.
- Making Tax Digital for Income Tax (MTDIT) will be expanded to those with incomes over £20,000 by the end of the Parliament. MDTIT comes in for the self-employed and landlords with income over £50,000 from 6 April 2026, with the level already reducing the £30,000 from 6 April 2027.
- Although higher rate pension tax relief avoided being restricted and the Chancellor stopped short of adding employers’ NICs to contributions, it was announced that pensions left on death will no longer be exempt from IHT from 6 April 2027.
- Double cab pick ups with a payload over 1 tonne will be classed as cars rather than vans from 5 April 2026. This follows a recent case and much publicity about an HMRC U-turn on the subject earlier in the year. Vehicles owned before 6 April 2026 will retain van status until 5 April 2029 however.
- Electric vehicle incentives for company cars have been maintained for another year along with the continuation of the 100% first year allowance for zero emission cars and chargepoints.
- Anti-avoidance rules relating to director loans have been strengthened from 30 October 2024.
- The late payment interest rate charged by HMRC on unpaid tax liabilities will be increased across all taxes by 1.5 percentage points from 6 April 2025.
- The reporting of benefits in kind via payroll software will be mandated from April 2026 as already announced.
- The manifesto pledge to remove the VAT exemption for private school fees will apply from 1 January 2025.
- The SDLT second home surcharge to be increased from 3% to 5% from 31 October 2024 for properties in England and Northern Ireland. This rate remains at 4% in Wales at the moment but we wait to see if the Welsh Government will make changes as a result of this announcement.
- Although included in the manifesto, the Chancellor was under some pressure to row back on the previously announced intention to abolish “non dom” status from the tax system. She has decided to press ahead though with some tinkering. The remittance basis of taxation for non-UK domiciled individuals (broadly those whose permanent home is outside the UK) is therefore to be replaced with a simpler and internationally competitive residence-based regime from 6 April 2025. From 6 April 2025 a new residence based IHT system will also be introduced removing the ability to use offshore trusts to shelter assets from IHT
Much of the talk from the Government ahead of the Budget was about growth. The numbers in the Budget were big with increased taxes, borrowing and spending, but the growth numbers predicted by the OBR were somewhat muted in comparison. Does this mean that an opportunity has been missed? Time will tell but there does appear to be some positive signs overall given the markets have had some minor jitters but generally appear stable post announcement, and the Chancellor has received a rare endorsement of the policies from the IMF.
As ever the tax announcements are complex and their impact is wide ranging. If you would like to discuss how best you manage your position, and/or discuss the commercial impact of the changes, then please contact us to discuss in more detail.
