Autumn Budget Breakdown

Summary of Tax Changes from Rachel Reeves' Autumn Budget

After a huge amount of speculation in the press we can finally report what the new Labour Government has decided to do (and not to do) on the tax front:

Stamp Duty Land Tax

The 3% surcharge paid by most landlords has risen to 5%.

This applies to transactions with an effective date on or after 31 October 2024.

Furnished Holiday Lettings

The special tax regime that provides lots of benefits to owners of furnished holiday lets will be abolished from 6th April 2025 (1st April for companies).

Capital Gains Tax

We at Taxcafe never thought the rates would be increased significantly in the Budget – not unless there was some sort of indexation relief to protect against inflation.

No changes were made to the rates for residential property: currently 24% if you’re a higher-rate taxpayer and 18% to the extent that you are a basic-rate taxpayer.

The rates that apply to most other assets like shares and commercial property have increased from 10% to 18% (basic-rate taxpayers) and from 20% to 24%.

The changes take effect for disposals made on or after 30th October 2024.

Business Asset Disposal Relief

This is the relief that lets you sell your business and pay 10% CGT on up to £ 1 million of capital gains.

The tax rate will increase from 10% to 14% from 6th April 2025 and to 18% from 6th April 2026.

Employer’s National Insurance

The Big Announcement in the Budget. Employer’s NI will change as follows from 6th April 2025:

• The rate will increase from 13.8% to 15%
• The salary level where it kicks in will fall from £9,100 to £5,000 for 2025/26 to 2027/28
• The employment allowance will increase from £5,000 to £10,500
• The restriction preventing employers with an NI bill of more than £100,000 claiming the employment allowance will be abolished

These measures will apparently raise £25 billion a year eventually.

However, the changes are not bad news for all employers. Take the example of a small business employing five people on £25,000 a year. Thanks to the big increase in the employment allowance, its national insurance bill will fall from £5,971 this year to £4,500 next year.

If that business had 10 employees, however, its NI bill would increase from £16,942 to £19,500.

There will also be a 6.7% rise in the national living wage to £12.21 per hour.

Inheritance Tax

Some sweeping changes to IHT including:

• Pension savings to be subject to inheritance tax from 6th April 2027. This is a major change because some people have been trying to preserve money in their pension pots to pass on to their children. Pensions, however, remain extremely attractive retirement saving vehicles and no changes were announced to income tax relief on contributions.
• The freeze to the £325,000 nil rate band and £175,000 residence nil rate band has been extended by a further two years until 5th April 2030. By then the £325,000 nil rate band will have been frozen for 21 years. It would be over £600,000 today if it had been increased with inflation.
• 100% relief under business property relief and agricultural property relief will be limited to a combined cap of £1 million per person from 6th April 2026. The rate of relief will be 50% thereafter (producing an effective IHT rate of 20%). For example, a qualifying business valued at £2 million will result in IHT of £200,000.
• 100% relief for AIM shares will be reduced to 50%.

Non Doms

The current regime is to be replaced with a residence-based regime from 6th April 2025.

Those who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.

Cars and Vans

• The 100% first year allowance for new electric cars and charge points will be extended by one year until 5th April 2026. This generous tax relief allows businesses to claim the full cost of a new electric car as a tax deduction against their profits.
• However, the benefit in kind percentage (used to calculate the amount added to the taxable income of the employee or director in the case of companies) will gradually rise from 2% this year to 9% in 2029/30.
• In a shock announcement buried in the Budget documents, the Government has announced that it will NOT introduce legislation to maintain the tax treatment of double cab pick-ups as goods vehicles. From 6th April 2025 they will be treated as cars for capital allowance and benefit in kind purposes (1st April for companies).

What Didn’t Change

Because there was so much speculation about tax changes ahead of the Budget it’s important to point out what did not change:

• The freeze in income tax thresholds will not be extended beyond 5th April 2028. They will be increased with inflation in 2028/29
• No changes to corporation tax rates or dividend tax rates
• No cuts to tax relief on pension contributions
• No cut in the £20,000 ISA allowance – it will remain unchanged until April 2030
• No employer’s national insurance on company pension contributions
• No changes to the CGT uplift on death for inheritance tax purposes
• Stamp duty thresholds to return to previous levels from 1st April 2025

All of the Budget changes will be covered in detail in the latest editions of our tax guides.