After months of speculation, the Chancellor, Rachel Reeves, delivered the first Labour Budget for 14 years.
In this article we summarise the main tax changes announced in today’s budget.
Businesses - National Insurance & Minimum Wage
There will be a few changes to employer’s NIC, coming in to effect from April 2025, as follows:
The rate of employer’s NIC will increase from 13.8% to 15%.
The threshold at which employer’s NIC will become payable for each employee will be reduced from £9,100 per year to £5,000 per year.
The Employment Allowance will increase from £5,000 per year to £10,500 per year.
The minimum wage will rise to £12.21 per hour in April 2025.
Capital Gains Tax
The rates of Capital Gains Tax will be increased, from 30 October 2024, as follows:
The basic-rate will increase from 10% to 18%
The higher-rate will increase from 20% to 24%
The rates of CGT on residential property will remain unchanged.
The rate of CGT on Carried Interest will increase from 28% to 32% from April 2025
Business Asset Disposal Relief (BADR) and Investor’s Relief will remain, but the rate will increase from 10% to 14% on disposals from 6 April 2025, and increase again from 14% to 18% on disposals from 6 April 2026.
Inheritance Tax
The existing nil-rate band (£325k), residence nil-rate band (£175k) and residence nil-rate band taper (£2m) will be frozen until 5 April 2030 at the earliest.
Pensions will be subject to IHT from April 2027, with further details to be published soon.
Reforms will be made to Business Property Relief (BPR) and Agricultural Property Relief (APR) from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets. In addition to existing nil-rate bands and exemptions, the 100% rate of relief will continue for the first £1 million of combined agricultural and business property to help protect family farms and businesses, and it will be 50% thereafter. The government will also reduce the rate of business property relief available from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.
Non-Doms
From 6 April 2025, the current rules for the taxation of non-UK domiciled individuals will end. The concept of domicile as a relevant connecting factor in the UK tax system will be replaced by a system based on tax residence.
Stamp Duty Land Tax
From 31 October 2024, the SDLT surcharge on second homes will increase from 3% to 5%.
VAT
The application of VAT to private school fees from 1 January 2025 has been confirmed.
Other
Here is a summary of the other tax-related points raised in the budget:
A corporate tax roadmap will be published later today, but the main rate of corporation tax will remain at 25%.
From 1 April 2025, film and high-end TV companies will be able to claim additional tax relief on their UK visual effects costs.
The energy profits levy to be increased.
The existing 40% on business rates for the retail, hospitality and leisure industries will continue in 2025/6 up to a cap of £110,000 per business.
The Air Passenger duty on private jets will rise.
Tobacco Duty will increase in line with inflation.
The Enterprise Investment Scheme (EIS) will stay until at least 2035.
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Please contact us to find out how the above applies in your circumstances and how you can reduce your tax liabilities and maximise your tax efficiency.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.
