Now, with the announcement of Chancellor Rachel Reeves on the Autumn Budget 2024, big changes are announced in tax and financial policy. This year, two main points of focus will be dealing with a £40 billion gap in public spending while raising funds for investment in UK infrastructure and public services at the same time. Here are major updates that one should watch from both the individual and business perspectives:.
1. Changes to Capital Gains Tax (CGT) Rates and Exemptions
By far the most significant of these increases are in the rate of Capital Gains Tax: gains made on property disposal are now taxed at 24%, and other assets at 18%, previously 20% and 10%, respectively. The annual exemption has also been cut for this tax year to £3,000, from April 2024 onwards, potentially bringing more people within the CGT net.
2. Abolish the status of a non-domicile
This means that the nondomiciled tax regime, which, for individuals who can show non-UK domicile, allows them to limit their liability to tax in respect of foreign income, will be abolished from April 2025. In its place would be a residence-based model where all UK residents are taxed on worldwide income after a four-year grace period. The measure is a revenue-raising one and hence ought to have an impact on high-income individuals resident in the UK.
3. Capped Inheritance Tax up to 2030
Inheritance Tax allowances-the nil-rate band £325,000 and the residence nil-rate band £175,000-will be frozen up to 2030. Technically, this does not amount to an increase in the freeze of the thresholds - it has only meant that more estates incur IHT as values rise over time. UK tax measures 2024
4. National Insurance Contributions (NICs)
Employer NIC rates will increase from 13.8% to 15%, starting from April 2025. In addition, the extension of the NICs relief for employers of veterans and reduction of the secondary threshold for employer NICs to £5,000 annually contribute to the reduction of the NIC burden. Another freeze of the employee NIC thresholds probably helps the gradual phasing in of this increase.
5. Amendments to Corporation Tax Rates and Reliefs
Corporation tax rates remain at 25% for larger companies, but there are some changes to the reliefs available, most notably in respect of environmental incentives. The Energy Profits Levy applied to oil and gas companies also rose from the previous rate of 38%, with the relief for decarbonization projects extended. The changes to Capital Gains Tax relief on business assets mean that qualifying disposals are taxed at a considerably higher rate than in the past.
6. Stamp Duty Land Tax Changes
Those buying second homes and investors have to pay an additional 3% to 5% SDLT in addition to the basic rates. Corporate buyers of properties above £500,000 in value attract a higher rate of SDLT of 17%, designed to bring in further revenue from higher-value purchases.
7. Levies on private schools
The currently applied VAT exemption on tuition fees charged by private schools will be abolished as of January 2025; hence, such fees shall be subject to a 20% charge of VAT. Although the measure focuses on increasing revenues that will go to the government, this may make private education unaffordable for some.
8. New Environmental Tax: Carbon Border Adjustment Mechanism
Now, the Government is proposing a Carbon Border Adjustment Mechanism, or in short, CBAM, effective from 1st January 2027. The given environmental tax shall fall on high-emission imports like steel, cement, and aluminum. This should be levied to end the 'carbon leakage' and to apply a carbon price to imported goods to give an incentive toward concern with sustainable business practices.
9. Excise Duty on Tobacco, Alcohol, and Soft Drinks revised.
The duty on tobacco and alcohol has been increased to rise above inflation, and the Soft Drinks Industry Levy will increase incrementally over the next five years. These are the so-called 'sin taxes': in line with the government's twin aims of encouraging healthy choices and raising revenue.
10. Fuelduty and Vaping Product Duty
Fuel duty will remain frozen at current levels until 2026, pending consultation into potential reforms. A new duty on vaping products will be introduced from October 2026, starting at £2.20 per 10ml of vaping liquid.
11. Increases in Vehicle Excise Duty
From April 2025, rates on cars, vans, and motorcycles will increase in line with the Retail Price Index. Rates will also increase in stages so that over time, EVs make a fairer contribution to the revenues raised from the more conventional equivalents.
12. Improvements on the Taxation of Pensions and Employees' Benefits
The following changes will be effected: some pension exemptions from the inheritance tax will be altered, and employer NICs may be charged on pensions. In an effort to make tax admin easier, payroll reporting for employee benefits and benefits-in-kind will be extended to include from 2026.
The upcoming 2024 Autumn Budget will be about revenue collection, coupled with steps to be taken respecting minimum necessary cuts in spending. Some of these are actually intended to bridge the gap in the public expenditure umbrella, focusing on areas related to investment in infrastructure, health, and education. As new legislation and consultations are published, CCS Law will be watching for further changes.
For further detailed advice and help, please contact us at CCS Law.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.
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