The 2024 Autumn Budget has introduced significant changes across taxation, wages, and allowances, affecting business owners and directors alike as they plan for the upcoming financial year. Chancellor Rachel Reeves, in her first budget, underscored her commitment to stabilise the economy, avoid austerity, and foster sustainable growth. This budget marks a fresh approach by the Labour government, one that emphasises investing in long-term stability.
To help break down these key updates, our own Ascentis tax expert, Mark Overend, has produced a video summarising the primary points from the budget announcement, offering insights into how these changes may impact businesses and what directors should be aware of heading into 2025.
In his video, Mark covers major updates, including an increase in Employers’ National Insurance contributions and adjustments to Capital Gains Tax. He explains how new rates, such as the upcoming 15% Employers’ NI and the rising Capital Gains Tax rates, could affect company planning, particularly for payroll and asset management. Mark also highlights the importance of proactive tax planning to help business owners manage potential increases in overheads and capitalise on available allowances.
Key Highlights: Employers’ National Insurance and Wage Increases
One of the most immediate changes affecting businesses is the increase in Employers’ National Insurance, which will rise from 13.8% to 15% in April 2025. Paired with a reduced threshold from £9,100 to £5,000, this change means more businesses will need to account for this added cost. To alleviate the impact, the Employment Allowance will increase to £10,500, which will benefit small businesses with lower payroll expenses.
Additionally, the National Minimum Wage will increase by 6%, setting the new National Living Wage at £12.41 per hour for those over 21. For smaller companies, the enhanced Employment Allowance will offer more relief, while larger businesses should prepare for increased wage costs.
Capital Gains Tax Adjustments
Capital Gains Tax will see changes aimed at increasing government revenues. From April 2025, the basic rate will rise to 18% and the higher rate to 24%. This move gradually aligns Capital Gains Tax with current rates applied to residential property sales. Business Asset Disposal Relief (BADR) will also be affected, with rates rising from 10% to 14% in 2025, and to 18% by April 2026, although the £1 million lifetime allowance will remain unchanged.
Entrepreneurs planning to sell assets or shares should consider tax planning to manage exposure and possibly optimise any available reliefs.
Corporate Tax Rates and Income Tax
Corporate tax will remain at 25% for the foreseeable future, which is welcome news for businesses looking to maintain stability. Additionally, there are no changes to income tax rates or personal allowances, meaning current salary and dividend structures can remain in place.
Major Changes in Inheritance Tax and Property Reliefs
The Chancellor has introduced changes to Inheritance Tax, especially regarding business and agricultural property reliefs. From 2027, only the first £1 million of combined business or agricultural assets will be exempt. Assets exceeding this threshold will be subject to a 20% inheritance tax. Furthermore, pensions left to beneficiaries will now form part of the taxable estate, bringing forward the need for timely estate planning.
Fuel Duty Freeze and Business Rates Relief
Reeves announced a freeze on fuel duty, which will remain at current levels, including the 5p cut, for another year. For businesses that rely on transportation or delivery, this decision provides some relief. Additionally, the 75% business rate discount, which was set to expire, will be replaced by a 40% relief capped at £110,000.
Abolishing the Non-Dom Tax Regime and Residency Rule Updates
From April 2025, the non-domiciled tax regime will be abolished, meaning that foreign income will fall under the UK tax net for residents who previously benefited from this exemption. This change will impact UK residents with foreign income sources, particularly those residing in the UK temporarily.
Other Notable Changes in the Autumn Budget
- Stamp Duty Surcharge Increase: The surcharge for additional property purchases, including those by limited companies, will rise from 3% to 5%.
- VAT on Private School Fees: From January 2025, private school fees will be subject to VAT, and from April 2025, private schools will lose business rate relief.
- Freeze on Tobacco Duty: Tobacco duty will see a one-off increase, with additional duties on vaping liquids from 2026.
- Air Passenger Duty Adjustments: Short-haul economy flights will see a modest increase of £2, while private jet travel will incur a higher duty rate by 50%.
- New Investment in State Education: £2.3 billion additional funding for schools, increased core budget, and £300 million specifically for further education.
- Extended Support for Electric Vehicles: Company car tax incentives for electric vehicles remain, with new incentives introduced from 2028.
- Windfall Tax Adjustment: Increased windfall tax on oil and gas, set to expire in March 2030, with a removal of the 29% investment allowance for future job protection.
- Health and Defence Funding: The NHS receives an additional £22.6 billion, and £2.9 billion will support the Ministry of Defence, including annual military support to Ukraine.
- Increased Support for Carers: Carer’s allowance will align with the equivalent of 16 hours at the National Living Wage, allowing carers to earn more annually.
These updates represent the Chancellor’s broader vision to invest in public services, drive economic growth, and address societal needs through increased financial support across sectors.
Preparing for 2025 and Beyond
With these significant changes, it’s beneficial for business leaders and high-net-worth individuals to review their tax strategies early. From tax-efficient pensions and inheritance planning to optimising investment reliefs, proactive planning is essential for minimising tax liabilities.
The Autumn Budget brings both challenges and opportunities for businesses. Our tax experts at Ascentis are here to help you navigate these changes and prepare your business for a successful 2024. Watch Mark Overend’s insightful video for more information and reach out to our team today for personalised tax advice.