The Chancellor’s Budget on 30 October 2024 introduced several significant tax changes, particularly affecting Capital Gains Tax (CGT), Employer National Insurance Contributions (NICs), and Income Tax for Non-Domiciled Individuals. There were also important announcements on VAT, Business Taxes, and Property Taxes. Below is a summary of the key points.
The Chancellor’s Budget on 30 October 2024 will increase employer NICs, raise the main rates of CGT, initiate reform of the tax treatment of carried interest, and confirmed the replacement of the remittance basis regime and removal of the VAT exemption for private school fees. Some of the smaller announcements were of equal interest, including extending mandation of Making Tax Digital for Income Tax and increasing the HMRC late-payment interest rate.
Capital Gains Tax (CGT)
- Main CGT Rates: Increased to 18% and 24% % (up from 10% and 20%) for disposals from 30 October 2024 onwards, with no changes to rates on residential property.
- Carried Interest: From April 2025, carried interest will be taxed at a single CGT rate of 32%. From April 2026, it will be treated as income under specialised rules.
- Business Asset Disposal Relief and Investors’ Relief: Both reliefs will see CGT rates rise to 14% in April 2025 and 18% in April 2026, with a reduced lifetime limit for Investors’ Relief at £1 million (reduced from £10m) from October 2024.
National Insurance Contributions (NICs)
- Employer Contributions: The secondary NIC rate will increase to 15% (up from 13.8%) from April 2025, with the eligibility threshold reduced to £5,000 (down from £9,100) and frozen until 2028. The Employment Allowance will increase to £10,500 (up from £5,000), removing the previous restriction based on NICs liability.
Personal Taxes
- Income Tax Thresholds: Income tax bands will remain frozen until April 2028, after which they will rise with inflation.
- Non-Dom Tax Rules: The remittance basis will be abolished from April 2025, with a new four-year regime for foreign income and gains. Temporary repatriation relief will be available for three years, subject to capped (lower of £300,000 or 30% of an individual’s total employment income) overseas workday relief.
Inheritance Tax (IHT)
- Nil-Rate Bands: Frozen until April 2030, with a new residence-based system aligning with tax changes for non-domiciled individuals. Reforms to agricultural and business property reliefs will take effect from April 2026.
Business Taxes
- Corporate Tax Roadmap: Confirms a cap on the main corporation tax rate at 25%, maintaining small profits rates and generous R&D reliefs.
- R&D Credits: Enhanced credits for audio-visual expenditure in the UK will include a 39% rate for visual effects costs from January 2025.
- Capital allowances – 100% first-year allowances for zero-emission cars and electric vehicle charge points extended until April 2026.
Property and Indirect Taxes
- Stamp Duty Land Tax: Higher rates for additional dwellings and company-owned properties will increase, with company rates on residential properties over £500,000 raised to 17% (up from 15%), effective from 31 October 2024.
- VAT on Private School Fees: The VAT exemption will end from January 2025.
Tax Administration
- Making Tax Digital (MTD): Income tax digitalisation will be mandated for those earning above £20,000, with full details to follow.
- HMRC Late Payment Interest: Will increase by 1.5% from April 2025. This has further widened the difference between late-payment and repayment rates
Other Announcements
- National Minimum Wage: Rising by 6.7% to £12.21/hour from April 2025. The 18–20 year olds rate will increase to £10.00 per hour.
- Fuel Duty: The current rates will remain frozen, with the 5p duty cut extended until March 2026.