Although it feels that we say it every time, surely with a new Chancellor, a new Government and a reported £22billion hole in UK finances, today’s Autumn Statement really has been the most hotly anticipated Budget of recent years?
With Rachel Reeves keeping (relatively) tight lipped until the big day, there has been surprisingly few leaks ahead of today’s announcement, but the wait is finally over (although she did keep us in suspense for over 30 minutes before mentioning tax!), and we now know what the Labour Party’s first Budget in 14 years has in store for us all.
Ahead of Gravita’s full analysis which will be available later this week, here are the headlines:
Personal Taxes
- Income tax rates and thresholds will remain frozen until 6th April 2028, then they will increase at the same rate as inflation. Until that point, as salaries increase, more tax will continue to be paid.
- Carried interest will be brought into the income tax regime but attract a reduction in the rate of tax applicable of 27.5% meaning that an additional rate taxpayer will pay tax at a rate of 32% from 6th April 2025.
Employment Taxes
- From 6th April 2025, Employers National Insurance Contributions (NIC) will increase by 1.2% to 15%. The secondary threshold (the point at which employers begin to pay NIC on their employees’ salaries) will reduce to just £5,000, down from £9,100.
The combined effect is that the employers NIC on an employee earning £50,000 will increase by £1,106 each year.
- The Employment Allowance (relief given to employers for the first tranche of NIC due) will be increased to £10,500 – which may mitigate the impact of the rate increase for many small businesses.
Capital Gains Tax (CGT)
- From today, CGT rates will be increased across the board. The lower rate will rise from 10% to 18%. The higher rate will rise from 20% to 24%. This is the same as is currently paid on residential UK property.
- Business Asset Disposal Relief (BADR) will be maintained at £1million, however the rate of tax paid on qualifying assets will increase from 10% to 14% from 6th April 2025 and to 18% from 6th April 2026.
Inheritance Tax (IHT)
- IHT thresholds will remain frozen at £325,000 (and £175,000 for residential property where relevant), and the rate will remain at 40%. The nil rate band (unlike property prices) has now been frozen for 15 years.
- Agricultural Property Relief (APR) and Business Property Relief (BPR) which currently provide 100% relief against IHT will be capped at a combined £1million from 6th April 2026. IHT will be payable on any excess at half the normal rate – i.e. 20%. This means that assets worth £2million that currently would pass IHT free will attract IHT of £200,000.
- In all circumstances the rate of IHT payable on shares designated as ‘not listed’ (i.e. AIM) will be 20%. This is a departure from their current BPR status as they will not be covered by the new £1miilion allowance.
- Another blow for those hoping to pass funds on IHT free – unused pension funds and death benefits payable from a pension on death will no longer pass free from IHT from 6th April 2027.
Corporation Tax (CT)
- No major changes to Corporation Tax – Annual investment allowance (AIA) will be maintained at £1million, R&D reliefs will not change, and the maximum rate of CT will continue to be 25%.
Non-UK domiciled residents
- As previously announced, the non-dom regime will be scrapped from 6th April 2025 and will be replaced by a residency-based system.
- As a sweetener, the Temporary Repatriation Facility which will enable Foreign Income and Gains to be brought back into the UK at beneficial rates will be extended to 3 years – 12% for the first 2 years and 15% in the last year.
VAT
- No changes to the VAT rates, but VAT on school fees will go ahead on 1st January 2025 as planned.
Stamp Duty Land Tax (SDLT)
- The SDLT surcharge on second properties will increase from 3% to 5% from tomorrow for individuals and from 15% to 17% for companies. As a result of that, the purchase of a £500,000 property tomorrow will cost £10,000 more than it will today if it is caught by this legislation. This will apply to second homes and (residential) investment properties.
Other taxes
- Fuel Duty will remain frozen and the 5p per litre cut will remain in place for a further 12 months.
- Alcohol duties for non-draft products will increase in line with RPI each year starting on 1st February 2025, but duty on draft beer will be cut by 1p a pint.
