Following Labour’s victory in the General Election, Rachel Reeves became the first female Chancellor to deliver a Budget on 30 October 2024. It is the second Budget of 2024 (after Jeremy Hunt’s Budget on 6 March 2024) and was a tax raising Budget. The following is a summary of the main points which affect small businesses (our client base).
Employers National Insurance
The biggest change, and one which will impact many small and medium sized businesses, are to Employers National Insurance (NI).
Firstly, the rate at which Employers NI is charged is going up from 13.8% to 15%.
Secondly, the threshold at which it is charged is dropping from £9,100 to £5,000.
Thirdly, the Employment Allowance (which is a credit to reduce the impact of Employers NI) is increasing from £5,000 to £10,500, which should shelter many smaller employers from the effects of the increase.
All of these changes are effective from 6 April 2025.
Capital Gains Tax
There are currently two sets of Capital Gains Tax (CGT) rates. The CGT rates on residential property are 18% (standard rate taxpayers) and 24% (higher rate taxpayers), whilst the corresponding rates for all other gains are 10% and 20%. These have now been aligned and the new CGT rates for ALL gains are 18% and 24%. This harmonisation is immediately applicable.
In respect of reliefs, the 10% rate for both business asset disposal relief (BADR) and investors’ relief (IR) remains for the rest of this tax year, but will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026.
Stamp Duty Land Tax
There is currently a higher rate of Stamp Duty on the purchase of an additional residential property by an individual of 3%. This will increase from to 5% for transactions with an effective date, usually completion, on or after 31 October 2024. This will also apply to the purchase of a residential property by a company.
Income Tax Thresholds
The current Basic Rate, Higher Rate and Additional rate thresholds for income tax have remained the same since 2021. However, the freeze will be lifted in April 2028 when the thresholds will begin to rise in line with inflation.
Inheritance Tax on Pensions
Personal pension pots are considered outside of the estate for Inheritance Tax (IHT) purposes. This exemption will effectively be abolished with effect from 6 April 2027.
High Income Child Benefit Charge
The thresholds for paying the High Income Child Benefit Charge (HICBC) were increased in the March 2024 Budget; Child Benefit becomes repayable once earnings reach £60,000 and the upper limit will be £80,000. At the time, it was also announced that there would be a radical reform of the mechanism of the HICBC by “moving to a system based on household rather than individual incomes”. However, the Budget confirmed that the Government will not proceed with the reform to base the HICBC on household incomes. Instead, there will be an update to the mechanisms by which the HICBC is collected; employed individuals will be given the opportunity to pay the HICBC through their tax code and the self assessment tax return will be pre-populated with child benefit data.
Double Cab Pickups
The tax treatment of cars and vans differ significantly, for VAT, capital allowances, and benefits-in-kind (BIK) purposes. Following a successful court case for HMRC, the Government announced that it will classify double cab pickups as company cars. This change comes into effect from 1 April 2025 for corporation tax and 6 April 2025 for income tax; existing capital allowances treatment will apply to those who purchase double-cab pickups before April 2025. Also, the transitional BIK arrangements will apply for employers that have purchased, leased or ordered a double-cab pickup before 6 April 2025. In this case, they will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.
NB HMRC tried to make this exact change in February 2024, only for it to be reversed shortly afterwards.
Further information is available here.
N. Goddard
4.11.24
