A commanding performance in the House of Commons by the first ever female Chancellor, Rachel Reeves. A long and consequential Autumn Budget statement which intends to raise taxes by £40billion; the bulk of which will come from raising National Insurance Contributions (NIC) paid by employers to 15%.
Armed with the Office of Budget Responsibility’s report, Rachel Reeves has unveiled her new tax and spending plans. Our public services will be fixed, our economy will grow and living standards improved to put us all on a stable footing and restore our confidence – how will we not feel the pinch?
Determined not to deviate from their manifesto promises, the Chancellor announced:
- An immediate increase to the lower rate of Capital Gains Tax (CGT) by 8% and the higher rate by 4% to align with the current CGT rates on residential property of 18% and 24% respectively.
- Unless you exchanged contracts before 31 October 2024 to purchase an additional home to live in or rent out, a further 2% of additional Stamp Duty Land Tax will be payable when you complete your purchase (the same applies to purchases through companies).
- An increase to employers NIC by reducing the threshold to £5,000 and increasing the NIC rate – from 6 April 2025. However, not wanting to disadvantage small employers, their NIC bill could be reduced by claiming the increased ‘Employment Allowance’ of £10,500.
- A phased increase in the current 10% tax rate of Business Asset Disposal Relief (BADR) to 14% from 6 April 2025 and 18% from April 2026 to match the new lower rate of CGT. The same will apply to Investors Relief and the lifetime allowance is being slashed from £10m to £1m to align with BADR.
- The concept of Domicile, for tax purposes, will be removed from 6 April 2025, some further tweaks were also made to the earlier announcements made by the previous Government.
- Inheritance Tax (IHT) business reliefs are to be reformed from 6 April 2026. It is intended that:
- The value of your agricultural property and business assets eligible for 100% IHT Relief will be capped at £1m leaving the excess liable to IHT at 20%.
- IHT Relief on shares listed on AIM has been halved whereas subscribers to EIS and SEIS shares still enjoy 100% IHT Reliefs (and other tax reliefs).
- Currently circa 6% of Estates pay IHT but by continuing to freeze the nil rate band and the residence nil rate band for another couple of years to 6 April 2030, more Estates will be liable to pay the tax. Furthermore, inherited pensions are to be included from 6 April 2027.
- The main rate of Corporation Tax is to be capped at 25%, R&D reliefs will continue alongside full expensing and a favourable capital allowance regime.
- The British ISA will not go ahead and the £20k ISA allowance will continue until 2030.
The Chancellor confirmed she has kept to promises made, in her party’s manifesto, by not increasing Income Taxes and NICs for working people but will businesses be able to carry their increased NIC burden themselves – especially with an over inflationary rise in the national minimum wage?
Nevertheless, we should look forward to an inflationary increase to the personal allowance (but not until April 2028) and, in the meantime, to help with the cost-of-living crisis, there are no planned increases to fuel duty, the potholes will be filled and we can save a penny on a pint at the pub!
If you want to discuss how the budget changes will impact you do get in contact.
