On October 30, 2024, Chancellor Rachel Reeves delivered her inaugural Autumn Budget. Aimed at restoring economic stability and fostering a decade of renewal, the budget introduced significant changes funded by revised debt rules and an anticipated £40 billion in tax increases. Below, we explore the headline updates and their implications.
- Personal Taxation: Income, Savings, and ISAs
The personal allowance, frozen at £12,570, will remain unchanged for 2025/26. Tax bands also stay the same, but freezing thresholds in a climate of rising incomes means many will face higher tax liabilities. Key changes include:
- Savings Taxation: Basic rate taxpayers can earn £1,000 tax-free savings income, while higher-rate taxpayers retain a £500 allowance. ISAs remain tax-free, with annual contribution limits fixed at £20,000 until 2030.
- Dividend Allowance: Frozen at £500 for 2025/26, this adds to challenges for small investors reliant on dividend income.
- High-Income Child Benefit Charge (HICBC): For incomes above £60,000, the charge claws back child benefit at 1% per £200 earned.
- Capital Gains Tax (CGT): Immediate and Gradual Increases
Major CGT adjustments take effect immediately or in stages:
- Increased Rates: For qualifying business disposals, rates rise from 10% to 14% (April 2025) and then to 18% (April 2026). Entrepreneurs should plan disposals to minimize the impact.
- Annual Exemption: Fixed at £3,000, unchanged since the previous year.
- Employers and Employees: Rising Costs
From April 2025, employers face increased national minimum wage (NMW) obligations:
- Workers aged 21+ must be paid at least £12.21 per hour, a significant rise from £11.44.
- Reforms to national insurance contributions (NICs) include increasing the employer NIC rate to 15% and reducing the threshold for liability to £5,000.
These measures will heighten payroll costs, impacting business budgets.
- National Insurance for Self-Employed Individuals
While Class 2 NICs are effectively abolished, individuals with profits under the Small Profits Threshold (£6,845 for 2025/26) must contribute voluntarily to maintain state pension eligibility.
- Inheritance Tax (IHT): Major Changes Ahead
A pivotal reform in the treatment of pensions and reliefs will reshape estate planning:
- Undrawn Pension Funds: From April 2027, these will be subject to IHT, adding a new dimension to retirement planning.
- Business and Agricultural Reliefs: Starting April 2026, full relief is capped at £1 million, with reduced relief for values exceeding this.
- Property and Stamp Duty
- Stamp Duty Land Tax (SDLT): Additional dwellings face a 5% surcharge from October 2024, targeting second-home buyers and landlords.
- Threshold Reductions: The 0% SDLT threshold will decrease, creating higher transaction costs for buyers.
- VAT Changes
- Private School Fees: Subject to 20% VAT starting January 2025.
- Registration Thresholds: Maintained at £90,000, with no immediate relief for smaller businesses.
- Business Tax Updates
Notable business-focused measures include:
- Motor Vehicles: Double cab pick-ups, often favored for tax efficiency, must now be treated as cars from April 2025.
- Making Tax Digital: Phased implementation from April 2026 for income tax filers with earnings over £50,000.
- Future Proofing Corporate Tax
Corporation tax rates remain steady, with the small profits rate at 19% and a marginal rate of 26.5% for profits between thresholds. Additionally, R&D incentives will be preserved, providing some predictability for innovative businesses.
Conclusion
The 2024 Autumn Budget introduces sweeping reforms that will affect taxpayers, businesses, and investors alike. While public spending increases may bring benefits, the tax burden will rise significantly for many. To navigate these changes effectively, detailed planning is essential.
For personalised advice, contact us today to discuss how these updates impact you.
This article provides an overview based on the Autumn Budget 2024. For tailored advice, please consult a professional from Porter Garland Chartered Accountants.