The Autumn 2024 Budget introduces some significant changes to business taxation, and investment. The government aims to raise £40 billion through new taxes and increased borrowing to balance the budget by 2029-30, guided by a “stability rule” that will eliminate borrowing for daily expenditure in the future.
Main Changes Impacting Businesses:
Corporate Tax Stability and Roadmap:
The Budget confirms the Government’s corporate tax roadmap, providing a framework for business tax policy direction. While the corporation tax rate remains capped at 25%, upcoming consultations on capital allowances are expected and transfer pricing rules, including reporting requirements for medium-sized businesses.
Capital Gains Tax (CGT):
The Budget increases CGT rates, with the main rate rising from 10% to 18% and the higher rate from 20% to 24%.
- Business Asset Disposal Relief (BADR): Starting 6 April 2025, the CGT rate for BADR (available for certain disposals by employees and directors in unlisted companies) will rise from 10% to 14%, with a further increase to 18% effective 6 April 2026. This change will likely affect M&A activity and cross-border structuring as businesses pursue tax-efficient growth strategies. An increase in deal volumes is anticipated ahead of the implementation dates for these tax changes.
- Investors’ Relief: Rates for Investors’ Relief will increase in parallel with BADR, and the lifetime relief limit will decrease from £10 million to £1 million for disposals from 30 October 2024. This limits the financial benefits of the relief, potentially impacting investment in higher-risk ventures and startups.
Inheritance Tax (IHT) Changes for Business and Agricultural Property:
Effective from 6 April 2026, changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will cap full IHT relief at the first £1 million in combined business and agricultural property. Assets above this threshold will qualify for a reduced 50% relief, making IHT planning essential for rural businesses.
Business Rates and Incentives:
Retail, hospitality, and leisure sectors will continue to receive rate relief, albeit at a reduced rate of 40% instead of the previous 75%. Additionally, green investment incentives remain, including allowances for zero-emission vehicle infrastructure and specific audiovisual projects. However, there are concerns that other tax burdens introduced in the Budget may limit businesses’ ability to fund sustainable investments.
Employee Ownership Trusts (EOTs):
Legislation expected to be introduced in the Finance Bill 2024-25 to amend CGT, Income Tax and Inheritance Tax treatment.
These Budget measures bring notable changes, prompting businesses and investors to re-evaluate their tax strategies in light of future costs. With CGT, IHT, and corporate tax reforms, companies should actively plan for efficient structuring and carefully consider the timing of disposals.
Employer National Insurance Contributions
The rate of national Insurance contributions will increase from 6 April 2025 from 13.8% to 15%. The secondary threshold for when employer National Insurance contributions begin will decrease from £9,100 to £5,000.
To offer some protection for smaller business, the government has increased the Employment Allowance from £5,000 to 10,500 and expanded it to apply to all eligible employees, this means that employers will only start paying their National Insurance contributions when their bill rises above £10,500.
National Living Wage
We have an in-depth article on the changes to National Minimum Wage and how you as an Employer can prepare for the changes as the National Living Wage will increase on 1 April 2025. The rate will increase to £12.21 which is an increase of 6.7% for adults over 21. The rate for adults between 18-20 will also increase to £10 from £8.60, this is in line with the aim set out by the Labour Government to close the gap between the age bands set out in the minimum wage.
If you have any questions about the implications of the Autumn 2024 Budget, please contact the Stephens Scown Corporate team at corporate@stephens-scown.co.uk.