Budget Highlights

Rachel Reeves, Chancellor of the Exchequer, presented her first Budget on 30 October 2024.  It was the first Labour Budget in 14 years and the first Budget from a female Chancellor.

No change for….

The Government stated in their manifesto that they would not increase taxes on working people and the Chancellor confirmed during the Budget presentation that there would no increases to the basic, higher or additional rates of income tax, employee National Insurance or VAT.

Corporation Tax also remained unaffected with the main rate of Corporation Tax staying at 25% and the small profit rate at 19%

National Insurance

Although the Chancellor confirmed that there were no changes for employee National Insurance, from 6 April 2025, the employer National Insurance rate will increase by 1.2% to 15% and the threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year.  To support small business, the Employment Allowance will, however, increase from £5,000 to £10,500 from the same date.

Capital Gains Tax

As widely expected, Capital Gains Tax rates were increased.  The lower rate of Capital Gains Tax was increased from 10% to 18% and the higher rate from 20% to 24%, effective from 30 October 2024.  The Capital Gains Tax rates on the sale of residential property are already at 18% and 24% and were not changed.

The Chancellor also announced changes to Business Asset Disposal Relief.  The lifetime limit of £1m was unchanged but the rate on qualifying gains will rise from the current 10% to 14% from 6 April 2025 and then 18% from 6 April 2026.

Inheritance Tax

Some of the biggest changes announced were in relation to Inheritance Tax.

The current nil rate band threshold of £325,000 will be frozen until 5 April 2030.

Currently, pension funds passing on death fall outside of the Inheritance Tax regime.  From 6 April 2027 most unused pension funds and death benefits will be included in the deceased’s estate for Inheritance Tax purposes.  Where the fund passes to a spouse or civil partner, spousal relief will apply, but where the fund doesn’t pass to a spouse or civil partner the fund will be subject to Inheritance Tax.

From 6 April 2026 both Agricultural Property Relief (APR) and Business Property Relief (BPR) will be reformed.  APR and BPR currently give relief at 100% of the agricultural value/business value of assets where certain qualifying criteria are met.  The relief will be restricted to 100% on the first £1million of combined agricultural and business property and 50% thereafter.

In a further change, from 6 April 2026 the rate of relief for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as the Alternative Investment Market, will fall from 100% to 50% where certain qualifying criteria are met.

Stamp Duty Land Tax

The surcharge rate of Stamp Duty Land Tax on the purchase of an additional property has increased from 3% to 5% from 31 October 2024.

Double cab pick-ups

The designation of double cab pick-ups as vans or cars has always been a grey area.  From 1 April 2025 for Corporation tax purposes, and 6 April 2025 for income tax purposes, all purchases of double cab pick-ups with payloads, whether over or under 1 tonne, will be designated as cars.  This will impact on the amount of capital allowances that a business can claim in relation to the purchase as well as the value of the benefit in kind for employees.

High Income Child Benefit Charge

The previously announced move towards the HICBC being based on household income rather than solely on the main earner will not be implemented but the Chancellor confirmed that the previous interim measure whereby the threshold at which the HICBC applies increased from £50,000 to £60,000 and the withdrawal rate was halved will continue in force.

Interest rate on late paid tax

With the aim of reducing tax debts, and encouraging tax to be paid on time, the Government will increase interest on late payment of tax to 4% over base rate from 6 April 2025.

 

For more information or advice on how the changes will affect you, please contact your usual A C Mole contact or Tax Partner Amanda Gunter.