October 2024 Newsletter | Cylchlythyr Misol October 2024
BUDGET SPECIAL
Main headlines
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Income tax, National Insurance Contributions (for employees) and VAT rates all frozen, as per the Government's manifesto promises.
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The State Pension triple lock commitment has been maintained "for the duration of the Parliament".
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Capital gains tax rates on the sale of residential property kept at 18% and 24%, although the rates on all other asset sales such as shares have now been increased from 10%/20% to 18%/24%, effective from 30 October 2024.
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Employer National Insurance to increase from 13.8% to 15%. Threshold at which employers start paying NI on employees' wages reduced from £9,100 a year to £5,000 a year.
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Unspent pension pots will now be included in an individual's estate for inheritance tax from 6 April 2027 onwards. This is a major change and will likely affect the inheritance tax planning decisions for many individuals.
Further to this list, we now assess some of the specific announcements in detail:
Individuals
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Income tax personal allowances frozen until April 2028 - even though the tax rates have not increased, this will lead to individuals paying more tax as wages rise above these allowances.
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State Pension and Pension Credit to increase by 4.1% in April 2025 (c.£470 per pensioner), with other benefits to increase by 1.7% from April 2025.
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National Living Wage will increase by 6.7% to £12.21 per hour from April 2025 (annual increase of £1,400 to average full-time worker). Carer's Allowance earnings thresholds have also been increased.
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Fuel duty to be frozen for one year; alcohol duty on non-draught products will increase in line with RPI inflation from February 2025 (except a pint of draught beer will receive the equivalent of a 1 penny cut in duty); new duty on vapes from October 2026 of £2.20 per 10ml vaping liquid with further increases in tobacco duty.
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Late payment interest on unpaid tax will increase by 1.5% from April 2025 - ensure you pay HMRC on time.
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Subscription amounts to ISA accounts remain unchanged
Asset taxes
(i) Inheritance Tax (IHT)
Numerous, MAJOR changes, including:
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Individual tax-free allowance (including the nil rate band) frozen until April 2030. As asset prices rise, more estates will be captured by inheritance tax.
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As stated, the opportunity to use pensions as a vehicle for inheritance tax planning will be removed from April 2027, by bringing unspent pots into the scope of inheritance tax.
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From April 2026, Agricultural Property Relief and Business Property Relief will only be available on the first £1,000,000 of assets, with only 50% relief thereafter.
This will have a devastating impact on farmers (particularly farms over 100 acres) and other business owners, especially those businesses that are asset rich, but cash poor.
Business Property Relief also cut to 50% for AIM share portfolios.
(ii) Capital gains tax (CGT)
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After weeks of speculation, no change to the tax rates on the sale of residential property, with the rates for all other asset sales increased from 10%/20% to 18%/24%, effective immediately, from 30 October 2024.
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CGT reliefs to be less generous, particularly Business Asset Disposal Relief and Investors’ Relief. The tax rate for both of these reliefs will increase to 14% from April 2025, then increase again to 18% from April 2026.
(iii) Other asset taxes
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Higher rates of Stamp Duty in England to increase from 3% to 5% from 31 October 2024. This applies to purchases of second homes, buy-to-let properties and companies purchasing residential property. As this is a devolved matter, we await details of any changes in Wales.
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As previously announced, the concept of domicile status will be removed from the tax system, replaced with a new residence-based regime from 6 April 2025 (this affects income tax, capital gains tax and inheritance tax).
BUSINESS
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Corporation tax rate kept at 25% "for the duration of the Parliament", with the smaller company rate also maintained at 19%.
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Employer National Insurance rate to increase from 13.8% to 15% from April 2025. The threshold at which employers start paying National Insurance on their employees' wages is also reduced from £9,100 a year to £5,000 a year. This is an unexpected, and major development which will lead to significant increases in NI costs for businesses.
To offset this, Employment Allowance has increased from £5,000 to £10,500, meaning that many small employers will not pay any National Insurance. - Company car tax benefits for electric vehicles maintained, including 100% First Year Allowances. Double cab pick-up vehicles will be treated as cars for corporation tax purposes from 1 April 2025 onwards, with relief still made available for vehicles already purchased.
OTHER ANNOUNCEMENTS
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Making Tax Digital for income tax self-assessment will stick to the original timetable for rollout but will now capture those with incomes over £20,000 "by the end of the Parliament". Exact timings to be confirmed in future announcements.
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The 'Enterprise Investment Scheme' and 'Venture Capital Trust' investment vehicles have been extended to 2035.
We will continue to keep you updated on significant tax changes and Government announcements!
