Your essential guide to the Autumn Budget Statement 2024

Your essential guide to the Autumn Budget Statement 2024

A summary of the key changes for you and your business

The Chancellor unveiled the Autumn Budget Statement yesterday and Labour’s tax and spending plans to restore economic stability. In many ways, this was a historic event. It was the first Budget Statement made by a female Chancellor and the first by a Labour Government in some 14 Years. It was also billed as a budget for working people, and one that would fix the foundations of public finances and balance the books through a hefty £40 billion of tax rises.

To help you quickly understand the key changes from yesterday’s Budget Statement, we’ve prepared this guide summarising the key announcements and what they mean for businesses and individuals. For a broader perspective, we’ve also included a recap of the unchanged tax policies and measures. We hope you find these insights helpful as you plan for the months ahead.

In this guide you will find:

• A summary of the key changes announced in yesterday’s Autumn Budget Statement for both individuals and business owners.
• A comprehensive guide and reminder of what is already in place and remains unchanged.

The headline changes

For “working people”, the key highlights of the budget included a rise in the national living wage by 6.7% to £12.20 per hour, a freeze in fuel duty, and personal allowance thresholds beginning to rise in line with inflation from the 28/29 financial year. All of which “put more money in working people’s pockets”.

The Chancellor also confirmed the much-anticipated changes to Employers’ National Insurance Contributions and increases to inheritance tax, along with a series of other changes that will impact SMEs and business owners.

Here’s a summary of the headline changes:

Inheritance Tax (IHT):

• Thresholds (Nil Rate Bands) will be frozen until 2030.
• Undrawn pension savings will come into scope for Inheritance Tax (IHT) from 2027 onwards, as opposed to being outside of the scope previously, and taxed at income tax rates when drawn by the beneficiaries.
• Business and agricultural assets passed to beneficiaries will be changed. The first £1m will attract no IHT, with agricultural assets exceeding £1m having a relief of 50%. In addition, shares traded on the Alternative Investment Market (AIM) will also attract 50% relief.

Capital Gains Tax (CGT):

• Headline rates for Capital Gains Tax will change from 10% and 20% to 18% to 24%.
• Entrepreneurs will be pleased to learn that Business Asset Disposal Relief (BADR) will continue to apply when they dispose of their business. However, the rate of CGT on BADR-qualifying disposals is increasing from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.  These rates apply to the first £1 million of qualifying disposals.

3. Business Taxes:

Employers National Insurance (NI):

• The rate of Employers National Insurance will increase by 1.2% to 15%.
• Reduction of the Secondary Threshold: the rate at which employers start paying national insurance has been reduced from £9,100 to £5,000.
• The Employment Allowance, however, will be increased from £5,000 to £10,500.

Private schools:

• VAT Levied on Private School Fees from January 2025.
• Removal of Business Rates Relief from April 2025.

Business rates:

• 40% relief from business rates for retail, hospitality, and leisure industries from 2025/26 will be capped at £110,000 of relief for businesses.

Stamp duty:

• An increase of 2% in the surcharge on SDLT for second home purchases, or purchases of property by Buy-to-let businesses.
• This increases the surcharge to 5% from the previous 3%. Crucially, this is effective from 31 October 2024.

4. Closure of tax loopholes, and “crack-down” on tax avoidance.

Non-Domiciled Individuals:

• “Non-Dom” status for individuals will be removed.

Tax avoidance and corruption:

• There will be new investment into HMRC to modernise their systems and recruit HMRC debt collection agents.
• There will be an increase in the rate of interest charged on unpaid HMRC tax debt.
• The Government will recruit a Covid Corruption team to assist in uncovering businesses that took help during Covid “to line their own pockets”.

Our thoughts on the Budget Statement

Overall, yesterday’s Autumn Budget perhaps feels like it’s not as bad as we expected given the overwhelming sense of doom and gloom in the run-up. Regardless, some significant changes will impact businesses and individuals.

It does feel like businesses will once again need to pick up the bill to fund the rebalancing of the economy and investment into public services (that is no doubt needed) – whether that be by increased wages or a hike in national insurance bills. It remains to be seen if this will ultimately lead to increases in prices to cover these costs, which in turn will only fuel inflation that the Government has committed to keep at the 2% target.

With any Budget Statement, we would urge our clients, contacts, and anyone who feels they need support to reach out to our team for clear, tailored budget tax advice

The detail

Here we provide some further details on the announcements from yesterday along with information on what is already in place and what remains unchanged.

Income tax

• Your personal allowance: Your tax-free personal allowance will remain at £12,570 in 2025/26. The personal allowance is partially withdrawn if your income is over £100,000 and then fully withdrawn if your income is over £125,140.
• Income tax rates and allowances: For 2025/26, income tax rates and thresholds remain frozen at their 2024/25 levels. After your tax-free ‘personal allowance’ has been deducted, your remaining income will be taxed in bands in 2025/26 as follows:

‘Other income’ means income other than from savings or dividends. This includes salaries, bonuses, profits made by a sole trader or a partner in a business, rental income, pension income and anything else that is not exempt.

Tax on savings income

This will remain at the 2024/25 level of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Interest income from an Individual Savings Account (ISA) continues to be exempt from tax.

Tax on dividend income

A dividend allowance determines how much dividend income you can receive at 0% taxation, instead of the usual tax rates for dividend income. This will remain at the 2024/25 level of £500. Dividend income from a ‘stocks and shares’ ISA continues to be exempt from tax.

Individual Savings Accounts (ISAs)

The limit on how much you can save into ISAs (including cash and stocks and shares ISAs) in 2025/26 remains at £20,000 overall. This includes up to £4,000 that can be saved into a Lifetime ISA. The Junior ISA and the Child Trust Fund limit both remain at £9,000. These ISA limits are now fixed until 2030. Previous plans to introduce an additional ‘British ISA’ allowance will not be taken forward by the new government.

The High-Income Child Benefit charge (HICBC)

You may have to pay the HICBC if you are considered to have a ‘high income’ and child benefit is being paid in relation to a child that lives with you, regardless of whether you are a parent of that child. If you are living with another person in a marriage, civil partnership or long-term relationship, you will only be liable to HICBC if you have the higher income of the two of you. Since 2024/25 the child benefit ‘high-income’ threshold is £60,000. The HICBC is calculated at 1% of the child benefit received for every £200 of income above the threshold. This means that child benefit is only fully clawed back where income exceeds £80,000. The HICBC does not apply if the child benefit claimant opts out from receiving the payments. The new government will not proceed with previous plans to explore a household income basis of calculating the HICBC.

National Living Wage (NLW) and National Minimum Wage (NMW)

Employers must pay their employees at least the NLW, for workers aged 21 and over, or the NMW otherwise. The minimum hourly rates change on 1 April each year and depend on the worker’s age and if they are an apprentice.

The percentage increases for the 18-20-year-old rate (16.3%) and the 16-17-year-old and apprentice rate (18.0%) are significant. This is a step towards Labour’s ambitions for all adults to receive the same minimum wage. While this is good news for workers, employers will need to carefully consider affordability when planning their headcount for the year ahead.

Employment taxes

For employees
The national insurance contributions (NICs) rates and annual thresholds for employees for 2025/26 are as follows:

Earnings below the LEL are not subject to primary Class 1 NICs and do not accrue entitlement to state benefits. Earnings between the LEL and the PT do accrue entitlement to state benefits and are subject to primary Class 1 NICs, albeit at the 0% rate.

For employers

The Chancellor announced a package of changes to employers’ Class 1 NICs that will apply from 6 April 2025:

• An increase in the employers’ NICs rate, from 13.8% to 15%;
• A decrease to the threshold at which an employer starts to pay NICs on each employee’s salary (the ‘secondary threshold’) from £9,100 to £5,000*; and
• A widening of availability and an increase in the amount of the ‘employment allowance’, which eligible employers can offset against their employers’ Class 1 NICs liability, from £5,000 to £10,500. In particular, the employment allowance has only been available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year but that restriction will be removed for 2025/26.

* A higher secondary threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

This increase in employers’ NICs is undoubtedly a blow to some businesses and, indirectly, employees. Combined with the increases in the NMW and potential costs associated with reforms in employment law, these measures will stretch employer wage budgets and potentially lead to slower growth in some employee wages or higher costs for consumers.

Benefits in kind

Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. In 2025/26, employers will also pay Class 1A NIC at 15% on the value of benefits (13.8% in 2024/25).

The benefit value of a company car is calculated as a percentage of its list price when it was first registered. The percentage used is determined by the car’s carbon dioxide emissions or, if it is electric, its electric range. The percentages used are set to increase steadily until 5 April 2028, meaning employees with company cars can expect their percentage to increase by 1% in 2025/26 and consequently will pay more tax on their company car. More substantial increases will affect the percentages used from 2028/29 onwards.

The figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) increase in line with inflation for 2025/26:

Uncertainty surrounding the tax treatment of double cab pick-up vehicles with a payload of 1 tonne or more has been addressed: such vehicles that are not predominantly suitable for carrying goods are to be treated as cars for benefit-in-kind purposes. However, vehicles that were acquired or ordered before 6 April 2025 can be treated as vans until the earlier of disposal, lease expiry, or 5 April 2029.

Business tax

Motor vehicles

Continuing the topic seen above on double cab pick-up vehicles, a similar change in approach applies in relation to plant and machinery capital allowances claims. From April 2025, most double cab pick-up vehicles with a payload of 1 tonne or more will need to be treated as cars for capital allowances purposes. This is less favourable than the current common classification as a goods vehicle. While the change applies from April 2025, if the expenditure was incurred as a result of a contract entered into before 1 April 2025 for companies, or 6 April 2025 for non-corporate businesses, and the expenditure is incurred before 1 October 2025, it can continue to be treated as a goods vehicle.

Also on motor vehicles, it was confirmed in the budget that the 100% first-year allowance for zero-emission cars will be extended until 31 March 2026 for corporation tax and 5 April 2026 for income tax.

Making Tax Digital (MTD) for Income Tax

Under the government’s MTD for income tax initiative, businesses will be required to keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. These requirements will be phased in from April 2026, starting with income tax-paying sole traders and property landlords with combined trade and rental income of more than £50,000. This threshold will be reduced to £30,000 from April 2027 and to £20,000 by the end of this parliament. Eligible businesses are currently able to opt-in to HMRC’s beta testing programme. Please talk to us if you’d like to know more.

Electronic invoicing

In Spring 2025, the government will launch a consultation about electronic invoicing (e-invoicing) to gather input from businesses on how HMRC can support investment in e-invoicing and encourage uptake within the business community. As part of the government’s digitisation strategy, e-invoicing is likely to be mandatory in future.

Business rates

For 2025/26, retail, hospitality and leisure (RHL) businesses will be given a 40% relief on their business rates. The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year. The government is looking at longer-term measures to support RHL businesses and intends to permanently lower tax rates from 2026/27 for RHL properties with a rateable value below £500,000.

National insurance for the self-employed

Self-employed individuals pay Class 2 and Class 4 National Insurance Contributions (NICs). The relevant rates and thresholds are:

* From 2024/25 onwards, Class 2 NICs are effectively abolished. If trade profits exceed the SPT, the individual will accrue entitlement to state benefits such as the state pension. However, if trade profits fall below the SPT, the individual will need to pay Class 2 NICs voluntarily if they need the tax year to qualify for state benefit purposes.

Tax regime for furnished holiday lets

If you let out residential or commercial property, the profits are taxed as part of your ‘other income’. If you sell property that has been rented out, capital gains tax is likely to apply. Generally, rental business activity attracts fewer tax reliefs than trading ventures. However, if a residential property meets the strict definition of a ‘furnished holiday let’ (FHL), enhanced tax relief rules are currently available.

It has been confirmed that, from 6 April 2025, the special tax rules for FHLs will be abolished. Going forward, profits from FHLs will be taxed in the same way as any other rental business.
Please get in touch for a more detailed analysis of how the withdrawal of the FHL status will affect you.

VAT

From 1 April 2025, the VAT registration and deregistration thresholds will remain at £90,000 and £88,000 respectively. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%. In a key change to VAT, private school fees, which have been exempt from VAT, will be made subject to VAT at 20%. This will start from the school term beginning in January 2025.

Any private school fees paid after 29 July 2024 for tuition and boarding fees covering a period on or after 1 January 2025 will be subject to 20% VAT. Any fees pre-paid before 29 July 2024 for tuition and boarding from 1 January 2025 may also be subject to 20% VAT depending on the arrangements that the pre-payment scheme made.

Corporate taxes

Rates from 1 April 2025: Corporation tax rates and thresholds for the financial year to 31 March 2026 remain unchanged as follows:

The thresholds must be equally shared between companies in a group and those controlled by the same person or persons. If an associated company is dormant, then it is not included in this calculation. However, an associated company with only limited activity would be included, which could lead to higher than necessary effective rates of corporation tax. If you are in this situation speak to us about how you might be able to mitigate this.

Companies with profits between the small profit and main rate thresholds will qualify for marginal relief, which effectively means they pay tax at 19% up to the lower threshold and at 26.5% on the balance of their profits.

Roadmap

A corporate tax roadmap has been published by the government, with the view of creating a stable and predictable tax environment. This includes the following commitments:

• The corporation tax rates will not increase beyond the rates shown above. This includes retaining the small profits rate and marginal relief.
• Maintaining the annual investment allowance, giving 100% tax relief on the acquisition of up to £1 million worth of new or second-hand qualifying plant and machinery each year.
• Maintaining the ‘full-expensing’ regime, giving 50% or 100% tax relief on the acquisition of new and unused qualifying plant and machinery, without limit.
• Maintaining the rates of the current Research and Development (R&D) tax reliefs (see below).

Research & Development (R&D) reliefs

The R&D tax relief regime has seen a lot of change in recent years, and the Labour government is committing to the current rates of relief. Since 1 April 2024, this equates to a 20% taxable contribution from HMRC on qualifying R&D expenditure in the “merged scheme” (used by most claimant companies) and, for ‘loss-making R&D intensive SME companies’, an 86% uplift in deductible qualifying expenditure with a 14.5% payable tax credit. An R&D-intensive company is one that qualifies as an SME and at least 30% of its total expenditure is invested in R&D.

HMRC continue to take measures to tackle non-compliance in this area, which has led to a reduction in the number of claims made. They carried out compliance checks on 17% of claims received in 2023/24, compared with 10% for 2022/23. Please talk to us if you are considering claiming so that we can help you navigate HMRC’s compliance checks.

Annual Tax on Enveloped Dwellings (ATED)

Companies and some other entities may need to file ATED returns or pay ATED if they hold a UK residential property with a market value over £500,000. The rates of ATED will increase from 1 April 2025 so please contact us if you require any support with this.

Pensions

Despite numerous rumours of possible changes to the taxation of pensions in the run-up to the budget, the Chancellor decided not to make significant changes after all. The ability to receive a 25% tax-free lump sum of up to £268,275 (or higher in some cases) remains.

Individual contributions continue to attract income tax relief at the individual’s marginal tax rate and can be particularly effective where net income is between £100,000 and £125,140, where the personal allowance is tapered.

Employer pension contributions continue to qualify for a deduction against business profits and the rumour that employers’ national insurance would be imposed on pension contributions did not materialise. Note that the £60,000 annual allowance limit continues for 2025/26 and applies to the combined individual and employer contributions.

One change that was however announced was to make an individual’s undrawn pension fund subject to inheritance tax. From 6 April 2027, it is proposed that most undrawn pension funds and death benefits be included within the value of a person’s estate for inheritance tax purposes and for pension scheme administrators to become liable for reporting and paying any inheritance tax due on pensions to HMRC.

Inheritance Tax (IHT)

The main rate of IHT remains at 40%, reduced to 36% for estates where 10% or more is left to charity. The IHT nil rate band will continue to be frozen at £325,000 until 2030. The additional nil rate band for passing on the family home to direct descendants (residence nil rate band) will also remain at £175,000 until 2030. This means that married couples and civil partners will generally not pay inheritance tax where their combined estate is valued below £1 million. Note however that the residence nil rate band continues to be tapered where the value of the estate exceeds £2 million.

Gifts made by an individual in the 7 years prior to their death are classed as ‘potentially exempt transfers’ and can give rise to an IHT liability on death. Despite speculation in the run up to the budget, there will be no changes to this regime. Furthermore, taper relief continues to apply, reducing IHT payable where there are more than 3 years between the date of the gift and the date of death.

As mentioned above, it is proposed that, from April 2027, most undrawn pension funds and death benefits will be included within the value of a person’s estate for IHT purposes.

Farmers and business owners

The government is proposing to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets with no financial limit. From 6 April 2026, it is proposed that 100% relief will only apply to the first £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million. This means the relief will be focused on small family farms and businesses.

In a further proposed change, the rate of BPR available for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM, will be reduced from 100% to 50%.
As an anti-forestalling measure, the new rules will apply to lifetime transfers made on or after 30 October 2024 if the donor dies on or after 6 April 2026.

UK residency and domicile

Significant tax changes have been announced for UK resident non-domiciled individuals; namely those individuals spending most of their time in the UK but without permanently settling here. The concept of ‘domicile’ will be removed from the UK tax system and replaced by a regime based on years of tax residence.

Income and capital gains taxes

At present, individuals who are both resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains. However, UK resident non-domiciled individuals, they can claim a ‘remittance basis’ of taxation for their overseas income and capital gains and only pay UK taxes to the extent they remit (bring) the associated funds to the UK. To access this favourable tax treatment, non-domiciled individuals may be required to pay an annual ‘remittance basis charge’ of up to £60,000.

The concept of domicile and the remittance basis of taxation will be abolished from 6 April 2025, meaning all UK residents will default to being taxed in the UK on their worldwide income and gains. However, a 100% relief from tax on foreign income and/or capital gains will be available to individuals in their first 4 years of UK tax residence. It should be noted that if a ‘newly arrived’ individual claims this relief, they will sacrifice their UK personal allowance and CGT annual exemption, along with their ability to claim relief for some foreign losses.

From April 2025, for employed individuals eligible for the 100% relief from UK taxation on their foreign income and/or capital gains, an ‘overseas workday relief’ will remain available in relation to their duties performed overseas. Reforms to the regime will however take place, bringing increased flexibility for some but also a new maximum cap on the relief equal to the lower of £300,000 and 30% of total employment income.

Inheritance tax

Currently inheritance tax applies to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK-situated assets of a non-domiciled individual.

From 6 April 2025, individual’s resident in the UK for at least 10 out of the last 20 tax years, will be subject to inheritance tax on both their UK and non-UK assets. They will then remain within the full scope of UK inheritance tax for between 3 and 10 years after leaving the UK.

Stamp Duty

It has been confirmed that the 0% thresholds for Stamp Duty Land Tax (SDLT) will be reduced from 1 April 2025 as follows:

SDLT on additional dwellings such as second homes

For transactions with an effective date (generally the date of completion) on or after 31 October 2024, the higher rates of SDLT payable by purchasers of ‘additional dwellings’ (i.e. when they already own one dwelling), and by companies, increases from 3% to 5% above the standard residential rates. This measure is clearly targeted at buy-to-let landlords and those acquiring second homes.

The rate of SDLT payable by companies and non-natural persons (e.g. trusts) acquiring dwellings for more than £500,000 increases from 15% to 17% also from 31 October 2024.

Dealing with HMRC

Interest on unpaid tax liabilities
From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%.

Do you need any help in understanding the changes?

If you would like to find out more about how we could support your business, contact your Client Manager, call our team on 01527 69321, or email us at mail@haywardwright.co.uk.