On 30 October 2024, Chancellor Rachel Reeves delivered the Autumn Budget. With many predicting a Halloween scare in terms of tax rises for many apart from the loosely defined “working people”, The Chancellor did not disappoint.

Vowing to “restore stability” to the UK economy and re-build Britain, Rachel Reeves unveiled £40 billion of tax rises. The biggest rise by far came in the form of a rise in employer national insurance contributions which will raise an extra £25bn.

As anticipated, increases to capital gains tax, inheritance tax and stamp duty have also been announced, along with rises to alcohol duty, tobacco duty, air passenger duty and a range of other taxes.

Key Points:

The key points from the Budget include:

  • National Insurance – From April 2025, employer national insurance contributions will rise from 13.8% to 15%. The threshold at which companies start to pay tax on an employee’s salary has also been lowered, from £9,100 per year to £5,000. There is no change to employees’ national insurance contributions. For an employee earning £30,000 the extra cost will be £864.60 per annum (2.88% increase) and a salary at £50,000 will cost an extra £1104 per annum (2.21% increase).
  • State Pension – The basic and state pension will be increased by 4.1% next year under the Government’s “Triple Lock”, meaning 12 million pensioners will receive an additional £470 in 2025.
  • Capital Gains Tax (CGT) – Anticipated to raise £2.5bn and effective immediately, The Chancellor has increased the lower rate of CGT from 10% to 18%. The higher rate has also increased, from 20% to 24%.
  • Business Asset Disposal Relief (BADR) – When you sell a qualifying asset, such as shares in a business, the first £1M is taxed to CGT at 10% and the excess at 18%. These rates are increasing and will be phased in. Current rates are available until April 2025. Post April 2025, the first £1 million is 14% and excess at 24%. Post April 2026, the first £1m is 18% and excess is 24%.
  • Inheritance Tax – Inheritance Tax thresholds will not change until 2030, an extension of two years. The first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants. It also raises to £1M when a tax free allowance is passed to a surviving spouse or civil partner.
  • Inherited Pensions – However, in a significant change, inherited pensions will be brought into inheritance tax from April 2027. So, any unspent pension funds in a money purchase scheme (personal pension or SIPP) will be subject to IHT. There will be a consultation paper out that will determine how the money will be collected.
  • Agricultural Property Relief – Currently qualifying agricultural property, such as a farm, qualifies for an exemption from IHT if owned over two years. From April 2026 the first £1M passed on will be free of IHT but the excess will be taxed at 20%.
  • Business Relief – Qualifying businesses when owned for two years can be passed on free of IHT. From April 2026 this will be reduced to free for £1M and then the excess taxed at 20%. This will also affect AIM investments and AIM ISA’s which are used as an IHT planning tools, but will not have the first £1M tax free as we currently understand it at the time of writing.
  • Stamp Duty – Stamp duty surcharge on second homes is set to rise by 2% on Thursday 31 October, up to 5%
  • Corporation Tax – This is set to remain at 25%.
  • ‘Non-Dom’ Status – The current non-domicile tax regime will be abolished from April 2025. It will be replaced with a new “residence based scheme”. The Office for Budget Responsibility (OBR) predicts the new measures will raise £12.7 billion over the next five years.
  • Minimum Wage Increase – This will increase by 6.7% to £12.21 an hour, the equivalent of £1,400 per year for a full-time worker. For a 40-hour week this will be £25,396 pa
  • ISAs – The Chancellor has fixed ISA annual subscription limits and has confirmed that the British ISA would be scrapped. The annual ISA allowance had been consistently increased in recent years, but it will now remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.

Government Spending

The £40bn in tax increases will contribute to additional investment in the NHS, Schools and Defence. Rachel Reeves announced an extra £22.6 billion for day-to-day spending on the NHS in England, £6.7 billion for education investment and an additional £2.9bn increase to defence spending, amongst a range of other measures to “Rebuild Britain.”

The UK Economy

In terms of the wider economy, the OBR has predicted that the UK economy will grow by 1.1% this year, 2% next year and 1.8% in 2026. The Chancellor has announced that the Government will keep the Bank of England’s inflation target at 2%. The OBR forecasts inflation will average 2.5% this year, 2.6% in 2025 and then 2.3% in 2026.

We realise that there will be announcements in the budget that could impact on your financial plan. We are here to help you navigate these changes. If you would like further information and advice, please get in touch.

Further information is also available on the Gov.UK website here.

We will be analysing these tax increases in the next few days and will be letting you know what the strategy should be going forward.