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 The personal allowance is reduced by £1 for every £2 earned over £100,000 and is fully withdrawn once an individual’s income reaches £125,140.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