2024 Budget Summary
We now have Rachel Reeves solution to the current malaise of the UK economy. Government investment has been taken out of the calculation of Government expenditure, presumably because amounts invested create assets for the UK, and this has allowed her to invest heavily in UK infrastructure; the NHS, schools and other projects. To balance the government’s profit and loss account, she has increased the tax take by £40bn. As a result, the UK now has the highest tax burden since the 1940’s.
Thankfully, many of the speculated tax increases, a mansions tax, wealth tax, loss of higher rate relief for pension contributions and increases in dividend tax have not materialised. However, as you will see below, there are significant increases in capital gains tax and employer’s National Insurance, if you need more information about the detailed changes announced, please call our Brighton or Eastbourne office and we will be happy to discuss your options with you.
Capital Gains Tax
Capital gains tax rates have risen with immediate effect! Basic rate capital gains tax from 30th October 2024 is now 18% and high rate tax payers will be charged 24% from the same date.
Landlords will be relieved that the higher residential rate will remain at 24% until at least 5 April 2026. However, where a landlord is planning to sell, it may be prudent to do so while the 24% rate remains available, as beyond April 2026 nothing is guaranteed.
Business Asset Disposal Relief
The tax rate for BADR will increase from 6 April 2025 to 14% before increasing again from 6 April 2026 to 18%. The relief remains limited to a lifetime allowance of £1m.
Where the qualifying conditions are met, and a disposal is on the cards, it makes sense to make the disposal prior to 6 April 2025 – saving up to 14%, where the higher rate would otherwise apply.
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.
Contact us for help in planning your disposal to maximise the benefit of BADR.
National Insurance
Employment allowance is set to increase from £5,000pa to £10,500pa from 6 April 2025, with the £100,000 threshold being removed to expand the relief to all eligible employers. This does though go hand in hand with a rise in employers national insurance rate from 13.8% to 15%. In addition, the threshold from which employers NI is charged, falls from £9,100 to £5,000.
The upper secondary thresholds for under 21s, apprentices, armed forces veterans and new Freeport employers remain unchanged, and employers looking to mitigate the increases in their contributions could consider taking on workers within these groups. If taking on two part-time workers rather than one full-time worker fits your business model this will also reduce the NIC bill.
The Class 1A rate and Class 1B rate, which are aligned with the secondary Class 1 rate, also rise to 15% from 6 April 2025. This means that the Class 1A contributions payable on chargeable benefits in kind will also increase from 13.8% to 15%.
Making Tax Digital
A key element of MTD ITSA is converting accounting records into a digital format that can “talk” to government servers. As we approach the April 2026 deadline, it is imperative that affected traders and landlords have converted to the use of MTD approved software. If you are an affected sole trader or landlord, and you have not yet converted your record keeping to an approved format, please get in touch. We can help you choose an appropriate software product and assist with training. If required, we can also organise bookkeeping for you from both our Brighton and Eastbourne offices.
Inheritance Tax
The Government are to reform Business Property Relief (BPR) and Agricultural Property Relief (APR). The existing 100% rates of relief will be capped at the first £1 million of combined agricultural and business property; thereafter, the rate of relief will be 50%. A technical consultation is to be published in early 2025.
This will come as a blow to those looking to pass on their business or farms to their children.
If you are concerned by this change please call asap so we can consider your options.
Need more information on the above points or other elements of the budget?
If you need more information about any of the Budget changes and their possible impact on your tax affairs, please call so we can consider your options and always take professional advice before acting on any of the comments set out above.
