2024 Autumn Statement Update

Treasury Chancellor Rachel Reeves announced her 2024 Autumn Statement. This was Labour’s first budget in 14 years and the first budget in UK history to be delivered by a woman. 

Here are details of the key changes announced in the Budget:

Income tax Personal Allowance

Personal Allowance will be frozen at £12,570 in fiscal year 2024/25. The freeze will continue to April 2028.

The additional rate Threshold will remain at £125,140. The personal allowance is reduced by £1 for every £2 earned over £100,000 and is fully withdrawn once an individual’s income reaches £125,140.

The 20% basic rate band to remain at £37,700.

The Higher rate Threshold will remain at £50,270.

The nil rate band for savings income will remain at £5,000.

Dividends

The tax free dividend allowance will reduce from £1,000 to £500 from 6 April 2024. 

The dividend tax rates will remain at 8.25% for basic rate, 33.75% for higher rate and 39.35% for additional rate taxpayers.

National Insurance 

Employers National Insurance will increase from 13.8% to 15% from 6 April 2024.  

The Threshold for paying Employers National Insurance will be reduced from £9,100 to £5,000.

The Employment Allowance of £5,000 will increase to £10,500.

Directors Loans

The Section 455 tax on Directors’ loans will remain at 32.5%.

Corporation tax rates and bands

The main rate of corporation tax will remain at 25% for businesses with profits over £250,000. 

The rate will remain at 19% for small businesses with profits under £50,000 and a marginal rate of tax will apply to businesses operating between the two thresholds.

Annual Investment Allowance

The Annual Investment Allowance for companies will continue at £1,000,000 to 31 March 2026. 

Benefits in Kind

Benefits in Kind will need to be reported to HMRC in real time using RTI from April 2026. 

Research and Development

Adjustments will be proposed to the R&D scheme to make tax credits more accessible for small and medium-sized enterprises (SMEs).

Capital Gains tax

From 30 October 2024 the main Capital Gains tax rates for disposal will increase from 10% to 18% and the higher rate from 20% to 24%.

The capital gains tax rates for residential property will remain at 18% and 24%.

The annual exemption for capital gains tax will remain at the reduced rate of £3,000 from 6 April 2024.

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)

The rate for Business Asset Disposal Relief will increase from 10% to 14% from 6 April 2025, and will increase again to 18% from 6 April 2026. From 2026, the BADR will effectively match the lower rate of CGT.

VAT

The VAT registration threshold will be increased to £90,000. The deregistration limit is £88,000.

VAT on private school fees will be introduced from January 2025.

National Minimum and Living Wage

The National Living Wage will increase from £11.44 in 2024 to £12.21 from April 2025.

The National Minimum Wage for 18-20 year olds will increase from £8.60 in 2024 to £10.00 in 2025.

Changes to taxation via Umbrella Companies

From April 2026, recruitment agencies that use umbrella companies within their labour supply chains will be legally responsible for accounting for PAYE on workers’ pay. If there is no agency in a labour supply chain, this responsibility will be placed on the end client.

Pensions

The pensions lifetime allowance was removed from 6 April 2024. It was £1,073,100 in fiscal year 2023/24.

The annual pension allowance will remain at £60,000. 

Individual Savings Accounts (ISA’s)

The ISA Allowance will remain at £20,000 which can be apportioned between cash and share ISA’s. 

The annual subscription limit for junior ISAs will remain at £9,000 in 2024/25.

Savings allowance

The personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers will remain in line with prior year.

Inheritance Tax

The nil rate band for Inheritance tax will remain at £325,000.

The residence nil rate band will remain at £175,000.

Unused pension funds will be subject to inheritance tax from 6 April 2027.

Agricultural property relief and business property relief

From 6 April 2026, the existing 100% rates of relief will continue for the first £1m of combined agricultural and business property to help protect family businesses and farms. The relief will reduce to 50% thereafter.

Stamp Duty

The additional rate of stamp duty for second homes and buy to let properties will rise from 3% to 5%. The change is effective immediately, i.e. from 30 October 2024.

The SDLT threshold will be lowered to £125,000 from April 2025.

Business rates

The current 75% discount on business rates will expire in April 2025. This will be replaced by a discount of 40%, subject to a maximum discount of £110k.

Non Doms

The remittance basis scheme for non dom’s that allows foreign nationals to avoid paying tax on their worldwide income will be scrapped from April 2025 and will be replaced by a residence based system.

Summary

The 2024 budget included a significant rise in taxes across the board with businesses and wealthy individuals bearing the brunt of the cost. Small businesses were hardest hit with the 6.7% rise in the national minimum wage together with a rise in Employers NI to 15% combined with a reduction in the threshold for paying Employers NI reduced to £5,000. Businesses in the hospitality and retail sectors will be impacted the most by the rise in employment costs.  

The UK economy has been suffering from low growth together with rising inflation and difficult market conditions since the pandemic. The rise in taxes is will make the environment for running a business in the UK more challenging. It is difficult to see how the budget will promote growth in such an environment and a deeper recession is expected in the near term.

The significant rise in employment costs is likely to result in Employers scaling back on hiring permanent employees in the UK. This is likely to result in increased demand for the UK contractors to fill the gap. 

Belsize Accountancy are specialist accountants for contractors and small businesses.

2024 Autumn Statement Highlights

Treasury Chancellor Rachel Reeves announced her 2024 Autumn Statement. This was Labour’s first budget in 14 years and the first budget in UK history to be delivered by a woman. 

Here is the summary of the key changes in the Budget:

• Personal Allowance will be frozen at £12,570 in fiscal year 2024/25. 
• Employers National Insurance will increase from 13.8% to 15% from 6 April 2024.  
• The Threshold for paying Employers National Insurance will be reduced from £9,100 to £5,000.
• The Employment Allowance of £5,000 will increase to £10,500.
• The National Living Wage will increase from £11.44 in 2024 to £12.21 from April 2025.
• The main rate of corporation tax will remain at 25%. 
• From 30 October 2024 Capital Gains tax rates for disposal will increase from 10% to 18% and the higher rate from 20% to 24%.
• The rate for Business Asset Disposal Relief will increase from 10% to 14% from 6 April 2025, and will increase again to 18% in 2026.
• The additional rate of stamp duty for second homes will rise from 3% to 5%. 
• The remittance basis scheme for non dom’s will cease in April 2025.
• VAT on private school fees will be introduced from January 2025.

The 2024 budget included a significant rise in taxes across the board with businesses and wealthy individuals bearing the brunt of the cost. Businesses in the hospitality and retail sectors will be hardest hit by the rise in employment costs.  

A more detailed analysis of the Budget will follow. Please monitor the website for updates. Belsize Accountancy are specialist accountants for contractors and small businesses.

2022 Budget Update

Treasury Chancellor Jeremy Hunt has announced his 2022 Budget. In a year of turmoil, the UK released a Mini budget in October 2022, which prompted an adverse reaction from the markets, which resulted in the majority of the changes being reversed shortly afterwards and replaced with some additional changes in the Autumn Statement in December 2022.

Here is the summary of the key changes in the Budget:

Income tax Personal Allowance

Personal Allowance will be frozen at £12,570 in fiscal year 2023/24.

The additional rate Threshold will decrease from £150,000 to £125,140. The personal allowance is reduced by £1 for every £2 earned over £100,000 and is fully withdrawn once an individual’s income reaches £125,140.

The 20% basic rate band to remain at £37,700.

The Higher rate Threshold will remain at £50,270.

The nil rate band for savings income will remain at £5,000.

Dividends

The tax free dividend allowance will reduce from £2,000 to £1,000 from 6 April 2023. It will reduce further to £500 in fiscal year 2024/25.

The dividend tax rates will increase from 7.5% to 8.25% for basic rate, from 32.5% to 33.75% for higher rate and from 38.1% to 39.35% for additional rate taxpayers.

National Insurance

The National Insurance threshold for employees will be frozen at £6,396 in 2023/24.

The employment allowance of £5,000 will remain in line with prior year.

The class 2 small profits threshold will remain at £6,725 in 2023/24.

Directors Loans

The Section 455 tax on Directors’ loans will remain at 32.5%.

Corporation tax rates and bands

From 1 April 2023 corporation tax will increase to 25% for businesses with profits over £250,000.

The rate will remain at 19% for small businesses with profits under £50,000 and a marginal rate of tax will apply to businesses operating between the two thresholds.

Annual Investment Allowance

The Annual Investment Allowance for companies will continue at £1,000,000 to 31 March 2023. The allowance will reduce to £200,00 thereafter.

Benefits in Kind

Electric vehicles will be subject to vehicles excise duty from 1 April 2025. The benefit in kind charge for electric vehicles will increase by 1% in 2025/26 with further increases proposed in subsequent years.

Research and Development

From 1 April 2023, R&D relief for small businesses will be reduced from 130% to 85%. The cash repayment credit under the SME scheme will also be reduced from 14.5% to 10%.

Capital Gains tax

The annual exemption for capital gains tax will reduce from £12,300 to £6,000 from 6 April 2023. It will reduce further to £3,000 from 6 April 2024.

The main rates of capital gains tax will continue at 10% basic rate and 20% for the higher rate with the exception of gains on residential property which are taxed at 18% and 28% respectively.

Capital gains on residential property to be declared and paid to HMRC within 30 days of completion.

Business Asset Disposal Relief (formerly Entrepreneurs’ Relief)

The annual lifetime allowance for Business Asset Disposal Relief remains at £1m.

VAT

The VAT registration threshold will remain at £85,000. The deregistration remains unchanged at £83,000.

National Minimum and Living Wage

The National Minimum Wage will increase from £9.50 in 2022 to £10.42 from April 2023.

The National Living Wage will increase from £9.50 in 2022 to £10.42 from April 2023.

Changes to IR35 and Intermediary Rules

Plans to scrap the IR35 rules for the private sector in the mini budget have been reversed. IR35 to remain in place.

Domestic Reverse Charge in the Construction Industry

Contractors in the construction industry are required to apply the domestic reverse charge for VAT. The change will impact VAT registered businesses in the construction industry. Contractors at the end of the chain will continue to bill VAT to their clients and will account for the VAT of their respective CIS subcontractors.

Pensions

The pensions lifetime allowance will remain at £1,073,100 in fiscal year 2021/22.

The annual pension allowance will remain at £40,000.

Individual Savings Accounts (ISA’s)

The ISA Allowance will remain at £20,000 which can be apportioned between cash and share ISA’s.

The annual subscription limit for junior ISAs will remain at £9,000 in 2021/22.

Savings allowance

The personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers will remain in line with prior year.

Inheritance Tax

The nil rate band fr Inheritance tax will remain at £325,000.

The residence nil rate band will remain at £175,000.

Stamp Duty

From September 2022, the nil-rate thresholds of Stamp Duty Land Tax (SDLT) increased from £125k to £250k.

The nil-rate threshold for first time buyers increased from £300k to £425k.

Business rates

Business rates will be based on updated property valuations from 1 April 2023. This will result in increased tax burden for certain companies depending on the type of premises occupied. Businesses are advised to plan for this now and confirm whether they are affected.

Summary

At a time of rising inflation, the freezing of tax thresholds in the Autumn Statement will give rise to stealth taxes as more people will be dragged into the higher tax threshold in 2023. The combination of rapidly rising prices, combined with an increase in taxation and interest rates will likely lead to a significant recession next year. 

The unexpected reversal of the plans to scrap IR35 will affect certain Contractors and may result in increased taxes and reduction in contract opportunities.

Belsize Accountancy are specialist accountants for contractors and small businesses.