Autumn Budget 2024: Key Outcomes

Capital Gains Tax (CGT)

Chancellor Rachel Reeves announced a rise in CGT, with the basic rate increasing from 10% to 18% and the higher rate moving from 20% to 24%, effective immediately. This increase, while significant, leaves the UK's CGT rate still lower than other G7 countries according to the Chancellor.

Inheritance Tax (IHT)

Inheritance tax reforms represent one of the most anticipated and impactful measures. The freeze on IHT thresholds at £325,000 has been extended to 2030, but more notably, pension pots will now be included in taxable estates from April 2027. 

This change could see a significant increase in the number of estates subject to IHT, particularly affecting those who previously relied on pensions as an inheritance tool. Many people will need to review their plans for retirement, and wider estate planning, before the changes are introduced in April 2027.

Business Property Relief (BPR) and Agricultural Property Relief (APR) have also been reduced, limiting relief to 50% for assets over £1 million from April 2026. This change will substantially impact the succession plans for small businesses and family farms, for example.

Non-domiciled (non-dom) status

The non-dom tax regime will be abolished from April 2025. In its place, the Chancellor will introduce a residence-based scheme, which will provide incentives to investors and wealthy foreigners to come to the UK temporarily.

This reform may prompt some to consider relocating outside the UK to avoid the new tax burdens.

To further encourage investment into the UK, the government will extend the Temporary Repatriation Relief to three years. This is a vehicle that incentivises wealthy foreigners to bring capital and gains into the UK at a reduced rate.

VAT on private school fees

The government is pushing forward with their plans to add VAT to independent school fees – at the standard rate of 20%. Private schools will also face a removal of business rate relief from April 2025.

Stamp duty

The stamp duty surcharge on second homes and investment properties will increase from 3% to 5%, effective immediately. This is expected to reduce demand for second homes and dampen the buy-to-let market. Landlords and property investors will now face higher costs when buying property, particularly in high-value markets like London.

National Insurance Contributions (NICs)

From April 2025, employers will see a 1.2% rise in NICs, taking the rate to 15%. The threshold for paying these contributions will also be reduced to £5,000. These changes are expected to raise £25 billion by the end of the forecast period but will increase wage costs for businesses. We could see a further negative impact if businesses decide to pass these costs on to consumers. These changes could make ‘salary sacrifice’ pension schemes more attractive.

Minimum wage increase

The National Living Wage (NLW) for employees aged 21 and over will increase from £11.44 to £12.21 per hour from April 2025. This is part of the government’s effort to raise wages but will result in higher wage bills for businesses.

Private equity 'carried interest' 

Capital gains tax will increase on the performance fees that private equity fund managers make when assets are sold, known as ’carried interest’, to 32% from April 2025. The rate is currently 28%.

Business investments and tax reliefs

The Budget includes continued support for business investments, particularly through capital expenditure and innovation. 

The main rate of corporation tax will remain at 25%, and the government has committed to providing stability by retaining existing reliefs for capital investment and research and development. However, the increased tax burden through NICs and changes in relief structures may challenge business growth.

Existing capital investment reliefs such as the annual investment allowance and research and development (R&D) incentives will remain intact. This aims to provide businesses with certainty and encourage long-term growth.

The government is focused on supporting key infrastructure and transport projects, committing funds to initiatives like the trans-Pennine rail upgrade. These projects are expected to drive future investment and business opportunities across the UK.