Chancellor Rachel Reeves delivered her Budget on Wednesday 30
October 2024. She pledged to ‘invest, invest, invest’ to drive growth and
‘restore economic stability’.
The Chancellor Rachel Reeves yesterday delivered the new Government’s much anticipated first Budget since the General Election.
As expected there were a number of tax rises and significant cuts to several long-standing Inheritance Tax reliefs.
The headline act of an increase in Employer’s National Insurance by 1.2% from April 2025 had been leaked ahead of the speech, as had the reduction at the level of earnings at which this applies. The decrease in the threshold will lead to employers having to pay a minimum of £615 in additional NICs for every employee earning above £9,100. However, an increase in the Employment Allowance was also announced in an attempt to protect smaller business from the rises.
The key tax measures Reeves announced were:
The rate of Employer’s NICs will increase from 13.8% to 15% from 6 April 2025.
The earnings threshold at which an employer becomes liable to pay NICs for each employee will reduce from £9,100 to £5,000 per year from 6 April 2025.
The Employment Allowance, which effectively reduces the Employer’s NIC bill, will increase from £5,000 to £10,500 from 6 April 2025.
Inherited pension funds will be subject to IHT from 6 April 2027.
From 6 April 2026 Business Property Relief (BPR) and Agricultural Property Relief (APR), which currently provide a 100% exemption from IHT, will only continue to apply up to a combined allowance of £1m. A 50% rate will then apply on value of £1m (effectively a 20% rate).
From 6 April 2026 the IHT relief for AIM shares will reduce to 50%.
Capital Gains Tax (CGT) will increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers for disposals made on or after 30 October 2024.
The rate for Business Asset Disposal Relief (BADR), that provides relief for the first £1m of lifetime gains when selling businesses, will increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026.
The freeze of income tax and NIC thresholds will continue until 2028.
There will be a further 2% rise to benefit in kind rates for EVs in from 2028, leading to a rate of 9%.
From 31 October 2024 the surcharge on Stamp Duty Land Tax (SDLT) for additional residential properties will be increased by 2% from 3% to 5%.
Confirmation that all education services provided by a private school will be subject to VAT at 20% from 1 January 2025.
There will be a huge increase in investment to recruit HMRC Compliance Staff (5,000 new employees) to enquire into tax returns and close the ‘tax gap’.
Interest on late tax payments will rise to 4% over base rate (currently 5%) from 6 April 2025 to encourage slow payers to pay tax bills on time.
The concept of tax domicile will be abolished from 6 April 2025 with taxation based on years of UK residence instead.
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