Budget Summary for 30 October 2024: Key changes explained

As expected, Rachel Reeves' announcement contained a series of tax changes. This summary highlights changes that have taken effect immediately, changes set to come in 2025 and beyond, and measures that remain unchanged. Here’s what you need to know:

Changes effective immediately

• Capital Gains Tax (CGT): CGT rates rise to 18% for basic-rate taxpayers (up from 10%) and to 24% for higher-rate taxpayers (up from 20%). The 24% rate for residential property remains unchanged.
• Investors' Relief: The lifetime gains limit for Investors' Relief has been reduced significantly from £10 million to £1 million.
• Stamp Duty Land Tax (SDLT): The SDLT surcharge on additional dwellings increases from 3% to 5%.
• Close Company Loans and Other Rules: Stricter rules now apply to close company loans to participators, transfers of UK pension funds abroad, Employee Ownership Trusts, Employment Benefit Trusts, and liquidation of Limited Liability Partnerships to close tax loopholes.

From January 2025

• VAT on private school fees: Private school fees will be subject to VAT, as previously anticipated.

From April 2025

• Employer National Insurance Contributions (NICs): The Employer NIC rate will rise from 13.8% to 15%, with the Secondary Threshold reduced from £9,100 to £5,000.
• Employment Allowance for Small Businesses: Employment Allowance for NICs will increase from £5,000 to £10,500 for 2025/26.
• Vehicle Tax Treatment: Certain ‘double cab pickup vans’ will be treated as cars for tax purposes, impacting both personal and business tax calculations.
• Zero-Emission Car Incentives: The 100% first-year allowance for zero-emission car purchases and EV charging points will be extended until March 2026.
• Remittance Basis for Foreign-Domiciled Individuals: The remittance basis for taxation will be abolished and replaced with a residence-based scheme.
• Business Asset Disposal Relief CGT Rate: The CGT rate for disposals under this relief will increase from 10% to 14%.
• Carried Interest CGT Rate: The CGT rate on carried interest will increase to 32%.
• Agricultural Property Relief Extension: Agricultural property under environmental agreements with the government or approved bodies will now qualify for Inheritance Tax (IHT) relief.
• Business Rates Relief: Retail, hospitality, and leisure businesses will benefit from a 40% business rates relief for 2025-26 on property values up to £110,000.
• Charitable Business Rates Relief: This relief will no longer apply to private schools.
• Fuel Duty: Fuel duty remains frozen, with the 5p cut from March 2024 extended to 22 March 2026.
• Interest on late-paid tax: The interest rate for late tax payments will rise by 1.5 percentage points.
• Digital Signature Requirement: To improve security, digital signatures will be required for certain tax reclaims.
• National Living Wage and State Pension: Both will see above-inflation increases.
• Furnished Holiday Lettings: The tax advantages associated with Furnished Holiday Lettings will be phased out by the 2025/26 tax year.

From April 2026

• Further CGT Rate Increase for Business Asset Disposal Relief: This relief will see the CGT rate rise from 14% to 18%.
• Carried Interest Moved to Income Tax: Carried interest will shift to the income tax regime, with specific reliefs for certain disposals.
• IHT relief restrictions: Both Agricultural and Business Property Reliefs will apply fully only to the first £1 million, with relief limited to 50% above this value.
• New rules on Charitable Tax Reliefs: Additional restrictions will come into place for charitable tax reliefs, along with the closure of a tax avoidance scheme related to company cars.
• Making Tax Digital (MTD) for Self-Assessment: MTD for Income Tax Self-Assessment will take effect from April 2026, marking a significant shift towards digital tax reporting.

No change or later changes

• Pension Funds in Estates for IHT: From 6 April 2027, unused pension funds and death benefits will be counted in an individual’s estate for IHT purposes.
• Tax-Free Pension Lump Sums: No changes to tax-free lump sums from pension funds, nor a reintroduction of a lifetime allowance.
• Personal Tax Allowances and Rate Bands: Inflationary increases for personal income tax will return in 2028/29, following a freeze set to end in 2027/28.
• Corporation Tax Rates: These rates are expected to remain stable throughout this Parliament.
• Inheritance Tax Nil Rate Bands: These will remain frozen until April 2030, including the additional Residence Nil Rate Band.
• ISA and Junior ISA Limits: ISA and Junior ISA investment limits will stay fixed at current levels until April 2030.
• Company Car Tax Rates for 2028-2030: To provide certainty, rates for 2028-2030 have been published, retaining incentives for electric vehicle purchases.
• High Income Child Benefit Charge: No changes to the calculation basis for the High Income Child Benefit Charge; it remains based on the higher earner's income.

Need Help?

If you’d like to discuss this in more detail, please get in touch with your usual Larking Gowen contact. You can find contact details in the Our People section of our website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Sally Farrow