[06.11.24]

Here we look at the impact of the 2024 Autumn Statement and highlight areas which clients will wish to consider further or about which they may wish to seek further advice.

Businesses

The Autumn Statement included an increase in the Capital Gains Tax (CGT), other than for residential property.  The rate paid by basic rate taxpayers increased from 10% to 18% and from 20% to 24% for higher rate taxpayers. These changes were effective on 30 October 2024.  In addition to this increase, the flat rate of CGT applicable to disposals qualifying for Business Asset Disposal Relief (BADR) will also increase from 10% to 14% on 6^th April 2025 and again to 18% on 6^th April 2026. The qualifying criteria and lifetime limit remain the same.

The lifetime limit on Investors’ Relief has been reduced from £10 million to £1 million, in line with the lifetime limit for Business Asset Disposal Relief. Investors’ Relief provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company where certain criteria are met, subject to the lifetime limit.

Where the qualifying conditions are met and a disposal is on the cards, it makes sense to make the disposal prior to 6^th April 2025.  However, there are anti-forestalling provisions which will apply to target transactions entered into with the purpose of accessing favourable CGT rates.

If you are considering disposing of any of your assets, please contact Jackie, Andrew or Siobhan to discuss your options.

The Government has also introduced a package of reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts.  The reforms are aimed at preventing opportunities for abuse, ensuring that the regimes remain focused on encouraging employee ownership and rewarding employees.  If you are considering an EOT or EBT, again please contact Jackie, Andrew or Siobhan to discuss this further.

Changes were also announced to Inheritance Tax Business Relief and Agricultural Property Relief.  From April 2026 qualifying estates with agricultural or business assets will only be able to claim 100% tax relief on the first £1million of assets. Any value over £1 million will see tax relief restricted to 50%. A consultation is expected to be published next year with further details of the intended changes.

Property Investors

Stamp Duty Land Tax has been increased for second and subsequent residential properties from 3% to 5% from 31 October 2024. It will not apply where contracts were exchanged before that date, but completion is on or after 31 October 2024.  Clients will want to factor this, and the CGT changes, into their business plans for their property investments.

In the Spring Budget 2024, the Chancellor scrapped the tax advantages of Furnished Holiday Lets (FHL) businesses, including:

• Capital allowances will no longer be available for fixtures and furnishings
• Mortgage interest will no longer be claimable as a deduction from profit, and will instead be claimed as a ‘tax reducer’ meaning it is not eligible for higher rate tax relief
• FHL income will also no longer be considered relevant earnings for pension contributions

These changes will apply from 6^th April 2025.  Affected property owners have the 2024-2025 tax year to consider their CGT planning options before the option to rollover gains and claim the 10% rate on the disposal of a property expires.

Landlords with furnished holiday lettings who meet the conditions can also benefit if they dispose of their property within three years from the end of their FHL business. Again, making the disposal sooner rather than later will maximise the impact of BADR. The savings where the gain would otherwise be taxed at the higher rate fall to 10% from April 2025 and to 6% from April 2026.

Employers

The Autumn Statement set out an increase in employer’s Class 1 National Insurance, which is increased by 1.2% from 13.8% to 15% from 6^th  April 2025. In addition, the secondary threshold is also reduced, falling from £9,100 to £5,000.

However, smaller employers will benefit from the Employment Allowance rising from £5,000 to £10,500 from 6^th April 2025, meaning many small business will escape secondary contributions. From 6^th  April 2025.  Larger employers will also benefit from the Employment Allowance as it will no longer be restricted to those whose secondary Class 1 National Insurance liability was less than £100,000 in the previous tax year.

This increase to Employers’ NIC represents the biggest increase in ‘payroll taxes’ for employers in recent years. A way of mitigating some of the effects of the rise could be for employers to agree with employees on ‘salary sacrifice’ arrangements where bonuses or a percentage of salaries are paid direct into an employee’s pension scheme rather than through the payroll.  This would have the effect of removing both the employer’s NIC and employee’s NIC costs on the payments made into a pension that would have otherwise been taxed through the payroll.

From April 2025, the National Minimum Wage (NMW) for 18-20 year olds will be raised to £10 per hour, an increase of 16.3%. The NMW for under-18s and apprentices will also rise to £7.55 per hour.  The National Living Wage (NLW) for those aged 21 and over will also rise to £12.21 per hour.  The Chancellor also announced the Government’s intention to create a single adult NMW/NLW rate, meaning that eventually, all workers over 18 will be paid the same wage as other working age groups.

Individuals

Income tax and NICS for employees has not changed.  The Autumn Statement set out that income tax thresholds will not increase until the 2028-29 tax year.  Clients may therefore wish to consider deferring bonuses or other flexible income options to the 2028-29 tax year.

Currently most pensions are outside the scope of Inheritance Tax which means that individuals can pass on defined contribution pensions tax-free.  The Autumn Statement confirmed that from 6^th April 2027, most unused pension funds and death benefits will be included in the value of a person’s estate for IHT purposes. This will apply to both UK registered pension schemes and qualifying non-UK pension schemes.  A very small number of specified pension benefits will remain outside the scope of IHT. This is potentially a significant change depending on the other assets within the estate.  Clients may wish to discuss this with their financial advisors.

Castletons Accountants