Autumn Budget 2024

Income Tax Allowance + National Insurance + Rate Bands

Please be aware that since 1999 the Scottish Parliament started to have tax raising powers. Nowadays, it can vary the tax rates and thresholds of Non-Savings, Non-Dividend income for Scottish taxpayers. The differential between Scotland and the rest of the UK in this respect has grown quite significantly as demonstrated by the chart below. This makes things even more complicated for Scottish taxpayers when looking at carrying out any legitimate form of tax planning. The Scottish Budget is set for Wednesday, 4^th December 2024.

The Wales Act 2014 gave the National Assembly of Wales the first taste of tax raising powers and, like Scotland, they too can vary the tax rates in respect of Welsh resident taxpayers as regards Non-Savings and Non-Dividend income. However, to date they have continued to set income tax rates in line with those announced by the UK Government. The Welsh Government is planning to publish the detailed draft Budget on 10^th December 2024 and the final Budget on 25^th February 2025.

The Income Tax Personal Allowance and all other elements of the Income Tax system remain part of the Chancellor’s responsibility.

Under the previous Government the Personal Tax Allowance and the rate bands were frozen until April 2028. The Labour Government has stated they will not extend the freeze beyond that date but intend to increase allowances and rate bands in line with the rate of inflation from that date. Personal allowances will continue to be reduced by £1 for every £2 a person’s income exceeds £100,000.

From April 2025 the employers national insurance contributions on earnings is to increase from 13.8% to 15% with the Employers Secondary Threshold trigger point starting from £5,000 as opposed to the present threshold limit of £9,100.

The Employment Allowance (EA) is a Government initiative that allows eligible employers to reduce their National Insurance liability. From April 2025 the EA will increase from £5,000 to £10,500.

UK Tax Rates 2025/26 (except Scotland)

Scottish tax rates 2024/25 re non-savings, non-dividend income

2025/26 National Insurance rates

Dividends

• The zero rate tax dividend threshold will remain at £500 from 6^th April 2025.
• There will be no change to the dividend tax rates.

Furnished Holiday Letting (FHL)

• The announcement that the FHL regime was to be abolished was in the Spring 2024 Budget. However it did not get enacted before the General Election came about.
• However the Labour Government have since confirmed its demise.
• FHL will be treated the same as long term lets from April 2025 as regards income tax.
• Loan interest relief will be restricted to a 20% income tax credit from April 2025.
• Where an existing FHL business has an ongoing capital allowances pool of expenditure, it can continue to claim writing down allowances on that pool post April 2025 but not in respect of new expenditure after that date.
• There is an anti-forestalling rule which, with minor exceptions, prevents FHL owners obtaining capital gains relief through the use of unconditional contracts with effect from 6^th March 2024.
• FHL income will not be counted as relevant income for pension contribution purposes from 6^th April 2025 onwards.
• Certain capital gains tax reliefs will cease from April 2025 except where the FHL conditions are satisfied up to April 2025 and the criteria for that particular relief includes conditions which can still come into play post April 2025.
• Where the FHL business ceased prior to 6^th April 2025, business asset disposal relief (the 10% capital gains tax rate) may still apply to a disposal of the property within 3 years of the FHL business coming to an end.

Capital Gains Tax (CGT)

• The rate of CGT for Business Asset Disposal Relief and Investors’ Relief is increasing 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.
• No changes will be made to the 18% and 24% rates of Capital Gains Tax that apply to residential property gains.
• Rules will also be introduced that apply to forestalling arrangements entered into in respect of unconditional but uncompleted contracts before 30 October 2024, and for Business Asset Disposal Relief and Investors’ Relief, where a contract is made from 30 October 2024 to 5 April 2026 and completed from 6 April 2025.
• The Investors Relief (IR) lifetime limit will be reduced from £10 million to £1 million from 30 October 2024 for qualifying disposal made after that date.
• The capital gains tax rates pre 30^th October 2024 are:

UK CGT Rates

*If the Trust asset disposed of has been used in the beneficiary’s business, the gain may attract a 10% CGT rate

• The capital gains tax rates between 30^th October 2024 and 5^th April 2025 inclusive are:

UK CGT Rates

*If the Trust asset disposed of has been used in the beneficiary’s business, the gain may attract a 10 % CGT rate

• The capital gains tax rates for 2025/26 are:

UK CGT Rates

*If the Trust asset disposed of has been used in the beneficiary’s business, the gain may attract a 14% CGT rate

• There is no change as regards the capital gains tax annual exemption.

UK CGT Annual Exemption

*Note – the AE is only available to PRs for 2 tax years following the tax year in which the Deceased died.

** Note – the AE is divided equally between the number of Trusts set up by the Settlor (the AE is presently capped at £300  per Trust if 5 or more, or 10 or more if for the benefit of a disabled person).

Private Equity Profits

• Carried interest is a share of profits earned by investment fund managers or general partners in private equity, venture capital, or certain hedge funds.
• The capital gains tax rate for carried interest will increase from 28% to 32% from April 2025.
• Further reform to the rules will take place from April 2026.

High Income Child Benefit Charge (HICBC)

• The individual’s High Income Child Benefit Charge (HICBC) adjusted net income threshold will remain at £60,000.
• For individuals with income between £60,000 and £80,000, the rate at which HICBCis charged is halved, and will equal one per cent for every £200 of income that is more than £60,000.
• The government will not proceed with the reform announced in the Spring 2024 Budget to base the HICBC on household income.

Non-Dom Tax Status

• From 6 April 2025, the current remittance basis of taxation will be abolished for UK resident non-domiciled individuals.
• This will be replaced with a new 4-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of 10 tax years of non-UK residence.
• Qualifying individuals will not pay tax on FIGarising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges.
• They will not pay tax on non-resident trust distributions either.
• Individuals, who on 6 April 2025, have been tax resident in the UK for less than 4 years (after 10 years of non-UK tax residence) will be able to use this new regime for any tax year of UK residence in the remainder of those 4 years.
• The protection from tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the 4-year foreign income and gains regime.
• Transitionally, for Capital Gains Tax purposes, current and past remittance basis users will be able to rebase foreign assets they held on 5 April 2017 to their value at that date when they dispose of them.
• Any foreign income and gains that arose on or before the 5 April 2025, while an individual was taxed under the remittance basis, will continue to be taxed when remitted to the UK under the current rules. This includes remittances by those who are eligible for the new 4-year foreign income and gains regime.
• A new Temporary Repatriation Facility will be available for individuals who have previously claimed the remittance basis. They will be able to designate and remit at a reduced rate foreign income and gains that arose prior to the changes. This includes unattributed foreign income and gains held within trust structures.
• The Temporary Repatriation Facility (TRF) will be available for a limited period of 3 tax years, from 2025/2026. The TRF rate will be 12% for the first 2 years and 15% in the final tax year of operation.
• The measure extends the period of Overseas Workday Relief to 4 years to align with the new 4-year foreign income and gains regime.
• From 6 April 2025, Overseas Workday Relief will be subject to a financial limit on the amount of relief that can be claimed, this is the lower of £300,000 or 30% of an individual’s total employment income.

Pensions

• The annual pension allowance will remain at £60,000 for 2025/26.
• The money purchase annual allowance will remain at £10,000.
• The minimum Tapered Annual Allowance will remain at £10,000 for individuals whose adjusted income for the year is £260,000 or more.
• The pension tax free lump sum remains the lower of 25% of the pension value or £268,275.
• From 30^th October 2024, pension transfers from tax relieved UK pension to Qualified Registered Overseas Pension Schemes (QROPS) in the EEA and Gibraltar will be subject to a 25% charge, unless another exclusion applies.

Individual Savings Account (ISA)

• ISAs will remain unchanged at £20,000 until April 2030.
• Junior ISAs will remain unchanged at £9,000 until April 2030.
• Lifetime ISAs will remain unchanged at £4,000 until April 2030.
• Child Trust Funds will remain unchanged at £9,000 until April 2030.

State Pension (SP)

• Under the triple lock, SP rises in line with the highest of average earnings, inflation or 2.5% based upon September 2024 figures.
• The highest figure was earnings growth.
• The SP will increase by 4.1 % from April 2025.
• The weekly full state pension will increase from £221.20 to £230.30 from April 2025.

Inheritance Tax (IHT)

• The IHT rate will remain at 40% and the Chancellor has frozen the £325,00 IHT Nil Rate Band and the £175,000 Residence NIL Rate Band (RNRB) until April 2028.
• The commencement of the tapering off of the RNRB will remain at £2 million.
• Inherited pensions will fall within a person’s estate for IHT purposes from April 2027.
• Agricultural Property Relief (APR) is a relief from IHTavailable on the agricultural value of land and other property that is owned and occupied for the purposes of agriculture.
• Business Property Relief (BPR) is a relief from IHT available on the value of certain business assets.
• From April 2026 only the combined value of APR and BPR of £1 million will attract 100% IHT relief. Any value in excess of that limit will attract 50% IHT relief.
• Alternative Investment Market shares will only attract 50% IHT relief if held by the deceased for at least 2 years prior to death from April 2026.
• From 6^th April 2027 unused pension funds and death benefits payable from a pension will be brought into a person’s estate for IHT purposes.
• As part of these changes, pension scheme administrators will become liable for reporting and paying any inheritance tax due on unused pension funds and death benefits.

Annual Tax on Enveloped Dwellings (ATED)

• The ATED charge for those property companies liable to pay it, has been increased by 7% in respect of the 2025/26 ATED year.

Taxation of company cars

• Appropriate percentages for zero emission and electric vehicles will increase by 2% per tax year in 2028/29 and 2029/30, rising to an appropriate percentage of 9% in tax year 2029/30.
• Appropriate percentages for all cars with emissions of 1 to 50g of CO2 per kilometre, including hybrid vehicles, will rise to 18% in tax year 2028/29 and 19% in tax year 2029/30.
• Appropriate percentages for all other vehicle bands will increase by 1 percentage point per year in tax years 2028/29 and 2029/30. This will be to a maximum appropriate percentage of 38% for tax year 2028/29 and 39% for tax year 2029/30.

Van Benefit and Car and Van Fuel Benefit

• The van benefit charge will be £4,020 and fuel benefit charge £769 in the 2025/26 tax year.
• The car fuel benefit charge multiplier will be £28,200 in the 2025/26 tax year..
• The Government will no longer maintain the treatment of double cab pick-up vehicles with a payload of one tonne or more as goods vehicles.
• HMRC is updating guidance to clarify the position in respect of such vehicles which will be treated as cars for capital allowances, for benefits in kind and for some deductions from business profits. Transitional arrangements will also apply.

Vehicle Excise Duty (VED)

• The Budget announced VED first year rates for new cars registered on or after 1 April 2025.
• Zero emission cars will pay the lowest first year rate at £10 until 2029/30.
• Rates for cars emitting 1g/km to 50g/km of CO2, including hybrid vehicles, will increase to £110.
• Rates for cars emitting 51g/km to 75g/km of CO2, including hybrid vehicles, will increase to £130.
• All other rates for cars emitting 76g/km of CO2 and above will double from their current level.

Employee Ownership Trusts (EOT)

• There is a tightening of the EOT rules as regards disposals made to the trustees of an EOT on or after 30 October 2024.
• The revised tax treatment for contributions made to an EOT to repay the former owner and the changes to the Income Tax relief conditions for annual bonus payments to employees of EOT controlled companies also has effect from 30 October 2024.
• Legislation will be introduced to restrict former owners or persons connected with former owners from retaining control of companies post-sale to an EOT by virtue of control (direct or indirect) of the EOT.
• Trustees of an EOT must be UK resident (as a single body of persons) at the time of disposal to the EOT.
• Trustees must take reasonable steps to ensure that the consideration paid to acquire the company shares does not exceed market value.
• If qualifying conditions surrounding the EOT are breached, the timeframe to clawback tax relief from the vendor has been extended to the end of the 4^th tax year following the end of the tax year of disposal.
• A requirement that individuals provide within their claim for Capital Gains Tax relief information on the sale proceeds and the number of employees of the company at the time of disposal.

Employee Benefit Trusts (EBT)

• The changes to the Employee Benefit Trust Inheritance Tax regime will have effect from 30 October 2024.
• Restrictions on connected persons benefiting from an EBT must apply for the lifetime of the trust.
• The Inheritance Tax exemption will be restricted to where the shares have been held for two years prior to settlement into an EBT.
• No more than 25% of employees who can receive income payments should be connected to the participator in order for the EBT to benefit from favourable tax treatment.

Cultural Reliefs

• With effect from 1^st April 2025, companies that qualify for the Audio-Visual Expenditure Credit (AVEC), will be able to claim an enhanced 39% rate of AVEC on their UK visual effect (VFX) costs (increased from 34%).
• The AVEC’s 80% cap on qualifying costs will be removed for UK VFX costs. Qualify VFX costs incurred from 1 January 2025 will be eligible.

Tax Avoidance

• With effect from 30^th October 2024 there is a tightening of the anti-avoidance rules regarding company loans to participators.
• Where companies and their shareholders are attempting to avoid the s455 loan charge, tax is payable whether or not there has apparently been a repayment, or a repayment is subsequently made.
• From 30^th October 2024, a tax charge will arise where an Limited Liability Partnership (LLP) is liquidated, and assets are disposed of to the contributing member, or a person connected to them. The tax liability will arise on the chargeable gains made at the time the asset was contributed to the LLP.
• The government will introduce legislation in a future Finance Bill to close loopholes in employee car ownership schemes to prevent them from being used to circumvent the company car tax benefit in kind charge.
• Legislation will be introduced in a future Finance Bill to prevent abuse of the charity tax rules by strengthening several existing anti-abuse rules to ensure that only the intended tax relief is given. These changes will take effect from April 2026 to give charities time to adjust to the new rules.
• The government will introduce legislation in a future Finance Bill to make agencies responsible for accounting for PAYE on payments made to workers that are supplied using umbrella companies. Where there is no agency, this responsibility will fall to the end client business. This will take effect from April 2026.

Corporation Tax

• The corporation tax rates for those companies who do not make profits from oil extraction or oil rights in the UK or UK continental shelf have not been changed in respect of the financial year 2025 (starting 1^st April 2025) and will also remain for the financial year 2026 (starting 1^st April 2026) . It is as follows:

Rates for corporation tax years starting 1^st April

VAT

• The taxable turnover threshold for determining whether a business must register for VAT remains at £90,000 and the point at which a business can apply to deregister will also remain at £88,000.
• All education services and vocational training supplied by a private school or a ‘connected person’ for a fee will be liable to VAT at the standard rate of 20% starting on or after 1^st January 2025.
• Board and lodging services closely related to such supplies will also be liable to VAT at 20%, including when supplied by a ‘connected person’.
• Any school fees paid on or after 29^th July 2024 relating to the period from 1^st January 2025 will also be liable to the standard rate of VAT.
• The provision of nursery services to children below school age will remain VAT exempt as will state school education and sixth form colleges where no fee is charged.
• Where a Special Education Needs place is provided at a private school and is funded by a local authority (LA) or similar body, the LA will be able to claim a VAT refund on the fees charged.

Capital Allowances

• This Budget has not changed the ability for companies to claim a 100% first year allowance (FYA) for main rate expenditure (known as Full Expensing) and 50% FYA for special rate expenditure. These allowances are only available to companies.
• The 100% Annual Investment Allowance deduction for expenditure incurred of up to £1 million in purchasing plant & machinery also remains in place.
• The 100% FYA for qualifying expenditure on zero-emission cars and on plant or machinery for electric vehicle charge-points has been extended to 31^st March 2026 for Corporation Tax purposes and to 5^th April 2026 for Income Tax purposes.

Research & Development (R&D) and Patent Box

• There are no changes to the R&D rules following the merger of the R&D tax relief scheme for small and medium-sized companies and the R&D expenditure credit (RDEC) used by large companies for accounting periods beginning on or after 1^st April 2024.
• The SME rules restricting relief where part of the project expenditure has been subsidised have been removed.
• Loss-making SME companies claiming R&D relief are eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D
• For accounting periods beginning on or after 1^st April 2024, the intensity threshold is 30%.
• There is a one-year grace period that allows a company which fails to meet the intensity threshold, for example due to a one-off shock or small fluctuations in expenditure (for companies close to the threshold), to continue claiming the enhanced support in that year if it met the intensity threshold and successfully claimed enhanced support in the previous year.

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

• A reminder that the NMW and NLW are due to increase from the beginning of April 2025.

Accommodation offset £10.66

Stamp Duty Land Tax (SDLT) – England & Northern Ireland

• The temporary SDLT residential rates and thresholds which applied from 23^rd September 2022 comes to an end on 31^st March 2025.
• The SDLT residential rates and thresholds in existence immediately prior to that date will apply from 1^st April 2025.
• A non-UK resident person will continue to pay an additional 2% SDLT on a UK property purchase.
• The SDLT surcharge on acquiring an interest, in excess of £40,000, in a second residential property increase from 3% to 5% from 30^th October 2024.
• Corporate bodies purchasing residential property valued at more than £500,000will be charged SDLT at 17% from 31^st October 2024, unless an applicable relief applies.
• The Devolved Parliaments of Wales and Scotland set their own land transaction tax rates.

England + Northern Ireland SDLT residential rate

*First time buyers relief  – no SDLT up to £425,000 then 5% between £425,001 and £625,000.

If property is in excess of £625,000 then no relief due.

**Non-UK resident person may have to pay an additional 2% SDLT surcharge

England + Northern Ireland SDLT residential rate

*First time buyers relief no SDLT up to £300,000 then 5% between £300,000 and £500,000.

If property is in excess of £500,000 then no relief due.

**Non-UK resident person may have to pay an additional 3% SDLT surcharge

Wales residential Land Transaction Tax (LTT) 2024/25 rates

Scotland’s residential Land & Buildings Transaction Tax (LBTT) 2024/25 rates

*For first time buyers the zero rate band increases to £175,000

Business Rates (England)

• The government will introduce permanently lower business rates for retail, hospitality and leisure businesses from 2026-27. Until then they will receive 40% relief on business rates up to a cap of £110,000.

Vaping Product Duty (VPD) + Tobacco Duty(TD) Rates + Alcohol Duty (AD)

• With effect from 6pm on 30^th October 2024 duty rates for all tobacco products will increase using the TD escalator by 2% above inflation (based on the Retail Price Index (RPI)).The rate for hand-rolling tobacco by an additional 10% above the escalator, to 12% above RPI.
• There will be a one-off TD increase of £2.20 per 100 cigarettes or 50 grams of tobacco, effective from 1 October 2026.
• With effect from 1^st October 2026 there will be a single VPD rate of £2.20 per 10ml of vaping liquid.
• AD rates on draught products below 8.5% alcohol by volume (ABV), will be cut by 1.7%, so that an average ABV strength pint will pay 1 pence less in duty.
• AD rates on non-draught products will increase in line with RPI inflation.
• These AD measures will take effect from 1 February 2025.

Air Passenger Duty (APD)

• For 2025/26 the reduced rates for economy passengers will increase in line with RPI, rounded to the nearest pound.
• For 2026/27 all rates will be increased by 13%, rounded to the nearest pound.
• For 2026/27, the higher rates that apply to larger private jets will increase by a further 50%.

Fuel Duty

• The Chancellor will extend the 5 pence cut in the rates of Fuel Duty first introduced at Spring Statement 2022 until 22^nd March 2026.

Infrastructure Spending

• The Government has changed its self-imposed debt rules in order to free up £50 billion for infrastructure spending.
• The National Audit Office and the Office for Budget Responsibility will be asked to validate the investments made.
• The extra room for manoeuvre for spending on investment projects will not be able to be used for extra day to day spending, as this will need to be funded from tax receipts.
• There will be £500 million in new funding to help build up to 5,000 social homes and bring total investment in housing supply to £5 billion as part of the government’s Affordable Homes Programme.
• The existing social housing stock will also be protected by reducing Right to Buy discounts so that thousands more council homes remain in the sector.
• A further £1.4 billion will be allocated to rebuild crumbling schools.

Further Announcements

• To help support aims to reduce waiting times, there will be an additional £1.5 billion capital investment into new surgical hubs and scanners, alongside £70 million for new radiotherapy machines.
• £1.8 billon will be allocated for the expansion of government-funded childcare, with a further £15 million of capital funding for school-based nurseries.
• The first stage of the plan will pay for 300 new or expanded nurseries across England.
• The government will triple investment into free breakfast clubs to £30 million in 2025/26.
• From the beginning of next week the subsidised £2 bus fare cap will be increased to £3.
• The subsidy was due to come to an end in December this year but the government has extended it for a further year.
• The Chancellor has raised the limit people can earn before being ineligible for the Carers Allowance from £151 a week to £181.
• To keep more children in stable and loving homes, £44 million of funding has been announced to support kinship and foster carers.
• £240 million Get Britain Working package to include work, skills and health support for disabled people and the long term sick has been announced.
• Benefit reform will be accelerated this year, with 800,000 people on the old Employment and Support Allowance (ESA) benefit to be moved onto Universal Credit (UC) from this autumn instead of 2028.
• The Energy Profits Levy will increase from 35% to 38% from 1^st November 2024 until 31^st March 2030.
• The alternative finance (AF) legislation is amended, with effect from 30^th October 2024, to ensure that where an existing asset is used as a means to raise finance using AF, the tax outcome is broadly the same as conventional financing.
• The government is extending the employer National Insurance contributions relief for employers hiring qualifying veterans for a further year from 6 April 2025 until 5 April 2026.
• The late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5% from April 2025.
• The Help to Save Scheme will be extended a further two years to 5^th April 2027.
• Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords with income over £20,000 by the end of this Parliament.