The Autumn Budget 2024 has brought with it a wave of changes, not least the introduction of a £1m inheritance tax relief cap, which will heavily impact farming businesses across the UK. Nottingham chartered accountants, Clayton & Brewill, unpacks some of the key announcements.
After weeks of speculation over potential tax increases, adjustments in debt rules, and promises to end austerity, the government warned that “painful” decisions would be unavoidable in this Autumn Budget, citing challenging economic conditions inherited from previous administrations.
Rachel Reeves, the first woman to serve as Chancellor of the Exchequer, unveiled Labour’s Budget on 30 October 2024, just in time for Halloween – a fitting occasion to reveal an unnerving £40bn in tax rises…
“An end to short-termism”
The UK economy is set to grow marginally faster than anticipated this year and next, though the pace is expected to taper off toward the end of the parliamentary term, according to the Office for Budget Responsibility (OBR).
The OBR projects growth at 1.1% this year, rising to 2% in 2025. However, from 2026, growth is forecast to slow, reaching just 1.5% by 2028. It expects inflation to remain slightly above the Bank of England’s 2% target until 2029.
The Chancellor stated that this Budget would signal “an end to short-termism” and announced that, moving forward, the OBR will include a 10-year growth forecast in its Budget analysis.
Updates for businesses
Employers National Insurance Contributions (NICs)
The lion’s share of the £40bn tax rises that have been announced comes from an increase to NICs by employers. The amount employers will pay will rise from 13.8% to 15% from April 2025, and the earnings threshold at which businesses must start paying National Insurance on a worker’s income will be lowered from £9,100 to £5,000.
As a lifeline for smaller businesses, the Employment Allowance has been raised from £5,000 to £10,500, meaning 865,000 businesses will not pay any NI at all next year, with another one million paying the same or less as they did previously.
Capital Gains Tax
From today, Capital Gains Tax (CGT) will increase to 18% at the lower rate and 24% at the higher rate. The Chancellor noted that “the UK will still have the lowest capital gains tax rate of any European G7 economy.”
CGT rates on carried interest will rise from 28% to 32% from April next year, ahead of a further set of reforms from April 2026.
Business and Agricultural Property Relief
The government has capped agricultural property relief (APR) and business property relief (BPR). From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%, the Chancellor confirmed.
Stamp duty
The stamp duty surcharge on additional homes – such as buy to lets and holiday properties – will increase by 2% to 5% from 31 October 2024.
Minimum wage boost
The Chancellor confirmed an increase in the minimum wage, starting from April 2025:
- Over 21s: The National Living Wage will increase by 6.7%, rising from £11.44 to £12.21 per hour. This year, it rose from £10.42 to £11.44.
- Ages 18-20: Minimum wage for 18 to 20-year-olds will rise from £8.60 to £10.00, following an earlier increase from £7.49 this year.
- Apprentices: Apprentices will receive the largest increase, with wages rising from £6.40 to £7.55 per hour, up from last year’s rate of £5.28.
Business rates
The current 75% discount on business rates, scheduled to end in April 2025, will be replaced by a 40% discount capped at £110,000.
Corporation tax
The main rate of corporation tax, paid by businesses on taxable profits over £250,000, is to stay at 25% until the next election.
Personal measures
Tax rates
There will be no increase in the basic, higher, or additional rates of Income Tax, National Insurance, or VAT, with Reeves emphasising that this is “a Budget to protect working people.”
Inheritance Tax
Inheritance tax thresholds will be extended for two more years, until 2030. This means the first £325,000 of any estate can still be inherited tax-free until then. After this, it will still be taxed at 40 per cent. The Chancellor did not reveal what changes could be expected after this.
It has also been announced that inherited pensions will be brought into inheritance tax from April 2027.
Transport, alcohol, tobacco
- Bus fare cap: The single bus fare cap for many routes in England will rise from £2 to £3. This cap was previously set to expire in December.
- Fuel duty: Fuel duty will be frozen for the next year, saving the average motorist nearly £60 annually.
- Air passenger duty: Flights by private jet will see a 50% increase in Air Passenger Duty.
- Tobacco: Tax on tobacco will increase by 2% above inflation, with hand-rolling tobacco taxed 10% above inflation.
- Alcohol: The tax on non-draught alcoholic drinks will rise by the higher RPI inflation measure, while tax on draught drinks will be cut by 1.7%.
Winter fuel payments
As revealed ahead of the Budget, future winter fuel payments will be limited to those receiving pension credit or other means-tested benefits.
State pension increase
The new full state pension will rise by £460 per year from April 2025, reflecting a 4% increase in line with wage growth.
VAT on private schools
Beginning 1 January 2025, VAT will be applied to private school fees, affecting payments made for the January term from 29 July 2024 onward. Additionally, some private schools will lose business rates relief.
Energy windfall tax increase
The energy profits levy will increase from 35% to 38% starting 1 November 2024, with the levy remaining in effect until 31 March 2030.
We’re here to help
If you’re concerned about how any of the announcements from the Budget 2024 will affect your business, Clayton & Brewill is available to provide guidance and help navigate the complexities of this new fiscal environment.
