Autumn Budget 2024

Nimesh Shah, CEO

The current HMRC late payment interest rate is 7.5% – I would be concerned at a further increase and the impact it will have on people who genuinely cannot afford to pay. This comes back to people not getting the right support from HMRC in the first place.

Yet more investment for HMRC to tackle tax avoidance and modernise HMRC services – but will there be funding for HMRC to answer the phones?

Capping Business Property Relief at £1m and offering a discount of 50% on the remainder is a blow to family businesses.

If I heard correctly, there’s no overnight change to Capital Gains Tax, and this will take effect from 6/4/25. Whilst it’s only a slight 4% increase to CGT, I expect there will be a rush of transactions before the end of the tax year – this will give a big enough boost to CGT receipts.

The slight 4% increase to Capital Gains Tax and retaining the £1m Business Asset Disposal Relief will be hugely welcomed by entrepreneurs and private business.

The increase to employers National Insurance by 1.2% and lowering the threshold to £5,000 is huge and generates well over half of the £40bn of tax increases.

The Autumn Budget speech was very light on the reforms to non-doms – I am now wondering if the detail on the reforms is going to be significantly different to what we currently understand. The detail on the temporary repatriation facility for non-doms is going to be fascinating – £12.7bn of additional tax is significant.

A business employing someone on £35k will face a £926 tax increase as a result of today’s National Insurance increase.

Despite the crazy speculation on tax, there are actually very few measures announced in today’s Autumn Budget – just two measures (NIC increase and the extended temporary repatriation facility) account for over 94% of the £40bn of tax increases.

Small businesses will feel the pain of the employers https://x.com/hashtag/NIC?src=hashtag_clickNIC increase – a business employing just five people earning £50k each will face an annual NIC increase of over £5,500.

The Autumn Budget headline will be the increase to employer’s NIC to 15% – but the reduction to the threshold to £5,000 is the real https://x.com/hashtag/tax?src=hashtag_clicktax revenue raiser. This is an additional cost of £615 per employee.

The private equity industry will be relieved at only a 4% increase to the carried interest Capital Gains Tax rate.

Andrew Sanford, Partner

CPI forecasted at 2.5% but increases in Employers NI will be inflationary in terms of pushing up prices. That may be difficult to achieve.

The relaxation in planning reforms is welcome, but where are the builders and materials to initiate the growth in houses required?

The Chancellor’s assertion that cracking down on fraud will generate £6.5 billion seems highly optimistic as this historically has never generated that level of funds.

The increase in the National Living Wage of 6.7%, though known already, will hugely concern the stressed hospitality sector. There is of course Employers National insurance to factor into this increase too. It will be highly difficult to pass these costs on.

One ‘black hole’ that has not been plugged is the unfunded defined benefit pensions in the public sector. This will continue to place huge strain on the public finances.

The 2029 increase in personal tax thresholds will be just in time for the next UK General Election. Who would have thought that?

Still no mention of Apprentice Levy reform. Small businesses cannot access the levy pot and given the pressures of NI increases, the access to well-structured apprentice training is vital for our small businesses. Maybe this has just been put in the too difficult pile.

Alex Straight, Partner

Pointed mention of economist background and listening to bank of England and IMF and other experts, before throwing back to the disastrous ‘Mini Budget’.

Capping business property relief may encourage family businesses to consider succession planning and possible employee ownership of private companies.

For American businesses, despite the rise in National Insurance, the strong dollar and lower cost of living in the UK still makes the UK an attractive place to hire talent.

Simon Gleeson, Partner

£40bn in tax raises is the largest any chancellor has made since Norman Lamont in 1993 £38.5bn (Conservatives) and Dennis Healy £31.4bn in 1975 (Labour).

One has to question whether all the press releases, the leaks and the hysteria surrounding Capital Gains Tax increases on entrepreneurs and the start-up community were really worth it for 4% and the negative headlines this brought not just in UK but the VC/PE communities in US and Asia tracking this.

The Triple Whammy: Fiscal drag, cash is now back and technology solving all legacy problems are very much back in fashion for the next four years. All impact the working population whose jobs and livelihoods will now carry a heightened desire to navigate tax increases, funded by work and paid for by employers in reduced take-home cash and the threat of technology removing their jobs lurking in the background.

That was a long speech, with layered announcements and initiatives that don’t really move the dial in terms of growth. It feels more like a long maintenance log of infrastructure and incremental investments versus game-changer opportunities. R&D tax incentives are a huge incentive to overseas investors and the furore and misinformation around Capital Gains Tax changes has only compounded how lack-lustre the new Government has been to growth in the tech sector. It all feels a bit flat and disappointing for small business owners in the UK.

Simon Rothenberg, Partner

2% efficiency saving by using technology better: It will be interesting to see if the Government can achieve this as I would imagine private enterprises have saved more than that where technology has been correctly implemented.

Capital Gains Tax changes: Rachel Reeves wants investment, but not from individuals, penalising them for making capital gains.

Will Business Property Relief limited to £1m (and AIM investment relief changed too) – and then 20% relief thereafter – encourage even more planning for business owners? Or will some just decide it is not worth the effort in their later years and sell/shutter the business? That is of course assuming the Capital Gains Tax changes don’t scupper that plan too.

I have just had a message from a business owner of a hospitality business: “What is the point? We struggled through Covid and blew through our old profits there. Now they are saying that we are just going to pay people more, reduce our profits (as we can’t put prices up unless everyone does, and the big boys won’t) and then if we sell to a big boy we will get less. Maybe I should just close my doors now”. Telling.

Rachel Reeves’ final comment on tax was to say she wasn’t going to freeze beyond the previous Government’s decision but given she has made changes to many of their decisions, she could well have stopped that now. However, she didn’t and indeed it will only be one year of an increase before the next election. Four more years of fiscal drag.

There was no mention of Corporation Tax – no confirmation of no change in rates, no changes to capital allowances. Nothing. Not even mentioned.

Rachel Reeves has put all her eggs into the ‘investment will deliver growth’ basket. If the global economy enters a recession and tax take is lower than expected, given the promises made here she will struggle to reverse. I hope this isn’t the case and that her plans do deliver the investment and growth we all need to improve the economy.

Fiona Fernie, Partner

Why do we need a new Covid Commissioner. There have already been a number of enquiries into the abuse of contracts in the Covid period. The Government should just act on the information already obtained?

Rachel Reeves’ increase in employers’ NIC may not (technically) break the Government’s manifesto pledges. However, neither is it likely to encourage business growth. Indeed, the increased cost of employing staff is likely to have a negative rather than a positive impact, either in terms of less staff recruitment or lower wages – assuming that employers follow the rules meticulously.

But it poses another question: Will some employers be tempted to pay more staff off record (cash in hand) or as “consultants”? Given that HMRC published figures suggest that 60% of the current tax gap is attributable to small businesses, (meaning they are probably doing precisely that to some extent already) that would seem to be a very likely outcome.

In addition, if those same businesses are “feeling the pinch”, my concern is that there will also be an increased number of cash sales which never feature in the accounts. So far Ms Reeves has given no indication of how she will tackle this lack of compliance in the short term.

Gabby Donald, Partner

If the Government are going to invest in HMRC IT projects, let’s hope they’ve learnt some lessons from the experience with Making Tax Digital. The National Audit Office have been clear that HMRC has wasted huge amounts of money and resource there.

VAT on private school fees from January 2025. The introduction of this is rushed and will put huge pressure on schools and parents. It is unlikely to raise the amount of money expected to make the promised investments in the state sector. The rushed implementation will undoubtedly result in uncertainty and errors both from schools desperately trying to comply and HMRC in their attempts to apply the new measures. HMRC must be pragmatic in their approach to penalties for errors through allowing a ‘soft-landing’ period.

The introduction of VAT on private school fees part way through the academic year comes against a backdrop of feedback from the unions, educational sector and the tax profession that the measures should be delayed until September to allow the impact of the measures to be properly assessed.

The impact that VAT on private education will have on SEN provision, in particular, does not sit well against the recent NAO report findings that many EHCP assessments are subject to backlogs and Council budgets are in deficit.

I don’t believe that VAT on private education will raise anything like the proposed investment of an additional £6.7bn in the Department for Education for school buildings, teachers and breakfast clubs.

£1bn funding to assist with the remediation of cladding on tall buildings post-Grenfell. To get the full benefit of this and accelerate the works, there needs to be a joined-up approach with HMRC to resolve the uncertainty for developers and contractors on whether VAT at 20% applies to the works.

Adam Wildbore, Partner

National Living Wage up 6.7%, Reeves previously advised by Low Pay Commission it should increase 5.8%. 18-20 year-olds NMW increases from £6.80 to £10 and apprentices get a rise from £6.40 to £7.55 – all inflationary and will affect struggling business and hospitality sector further. More vacancies on the high streets?

Changes to CGT rates hurts investment and entrepreneurial spirits. Keeping BADRvat £1m and increasing the rate from 10% to 18% – this does not help the SME sector and we may see more business looking to close.

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