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Autumn Budget 2024

Autumn Budget 2024: Winners and Losers

 

Autumn Budget 2024

Who the winners and losers are from the Chancellor’s Spring Budget announcement?

Winners

You would be hard pressed to find many winners from Rachel Reeves’ 2024 Autumn Statement which is forecast to raise taxes by £40 billion, the highest tax take in over 30 years. However, it’s safe to say that the “painful” Budget that we were promised back in August will certainly be more so for some than for others.

In a move you might expect from a nascent Labour government itching to meet their mandate on a commitment to those on the lowest incomes, the National Living Wage (for those over 21) will rise next April by 6.7% from £11.44/hour to £12.21/hour. The National Minimum Wage will also rise for 18-20 year-olds, towards a single adult rate that, in the Chancellor’s words, will: “make work pay”.

The non-dom bombshell has finally dropped after months of speculation as to whether Labour would commit to scrapping a regime which has been surrounded by controversy, with some viewing it as a loophole for wealthy expats in the UK. We now know that Labour have officially committed to a new residence-based system, which should provide some certainty for non-doms who have being weighing up plans, amidst the pre-Budget panic, as to whether they will leave or stay in the UK.

In the slim pickings of who might do well from today’s announcements are new, temporary movers to the UK who will enjoy the first four years of residence with no UK tax charge on their foreign income and gains. They can also bring these funds to the UK, tax free for the same period.

For current non-doms who have been UK resident since 6 April 2022, the clock has already started ticking as the four-year window starts from the tax year they became UK resident. Any individuals who arrived in the UK before this date will, unfortunately, not be able to participate.

Those who enjoy the occasional pint will be heartened to know that the draught duty will be cut by 1.7%, saving a whopping 1p on your pint down the pub. Don’t get too excited if you prefer a vodka lime and soda, however, as alcohol duty rates on non-draught products will be increasing in line with inflation from February 2025.

A 10-year extension in the Enterprise Investment Scheme and Venture Capital Trust scheme to April 2035 has also been promised for those that like their riskier investments with a side of tax relief. This will be short shrift, however, with the sweeping targets for investors the Chancellor has made elsewhere (but more on this later).

Income Tax and NIC thresholds will be unfrozen from 2028/29 and will increase in line with inflation, and the commitment to the State Pension triple lock will be upheld. Whilst this does not come as a great surprise, in a Budget as wide-reaching as it is tough, you have to take what you can get.

A temporary lifeline has been extended to vehicle owners as the Chancellor has committed to the 5p/litre cut in fuel duty proposed by the last Tory government for the next year.

Losers

The first Labour Budget after 14 years wouldn’t be complete without a promise to those on low incomes, offset by a hit on investors with cash to spare. Reeves is playing the long game of ‘rebuild first, investment second’, and first on the list is entrepreneurs who have been hit by increases in both Capital Gains Tax (CGT) and decreases in valuable Inheritance Tax (IHT) allowances afforded to them.

The lower rate of CGT is increasing from 10% to 18%, and the higher rate from 20% to 24%. There is no change on the rates for residential property however – a small win.

For investors who might be reeling from the CGT hikes, some solace may temporarily be found in Ms Reeves’ commitment to maintain the £1 million Business Asset Disposal Relief (formerly known as Entrepreneur’s relief) lifetime limit, which currently allows for capital gains on the sale of qualifying businesses to be taxed at only 10%. However, this will be short-lived and is set to increase to 14% from 6 April 2025, and again to 18% from 6 April 2026.

The lifetime limit for Capital Gains Tax ‘investors relief’ is reduced from £10 million to £1million for qualifying disposals made after 30 October, and the rates of tax will change in line with Business Asset Disposal Relief.

If entrepreneurs are not caught by the CGT hike on sale, gifts of their businesses will be further exposed to IHT. From April 2026, the first £1 million of business property will continue to qualify for Business Relief (available at 100% to qualifying businesses), but the value above this amount will only garner relief at 50%, a 20% effective tax rate (if the gift is not fully relieved by the donor surviving at least seven years from the gift). This is a considerable blow to succession planning. Farmers transferring agricultural property will be hit by these rules too.

Investors in the Alternative Investment Market will not get away unscathed as AIM shares, which currently benefit from 100% relief, will only receive relief at 50% from April 2026.

From April 2027, most unused pension points and death benefits will be chargeable to IHT on death. Currently, pensions pots can be potentially passed on without an IHT charge.

Those purchasing second homes and investment properties in England and Northern Ireland have also been targeted with new higher rates of Stamp Duty Land Tax for additional properties. The supplementary charge is increasing from 3% to 5% from 31 October, coupled with the lower thresholds on property value bands set to take effect from 1 April 2025. Wales and Scotland have their own Land Tax regimes for property purchases.

Those in the private equity sphere are next on the list, with the CGT rate on carried interest increasing from 28% to 32% from April 2025. The Chancellor also warned of further measures levied on execs’ compensation received via carry, to be introduced from April 2026. This may include a move to treating this interest as earnings with the related NIC hit.

Also footing the bill for the £22 billion inherited black hole in public finances is purportedly not the ‘working person’ (however this may be defined) but their employers. Not to back out of the olive branch the Tories extended to workers in their pre-election Spring Budget, Labour are not reversing cuts to employees NICs, but instead are raising NICs for employers. From April 2025, employers NICs will increase by 1.2% to 15% and there will be a reduction in the secondary threshold (the level at which employers start to pay NICs on their employees’ salaries) from £9,100 to £5,000. Whilst this may be a relief to many employees, the impact that this will have on businesses (and by proxy, their employees) remains to be seen.

Non-UK domiciled individuals, who may currently benefit from the remittance basis for their foreign income and capital gains will cease to have this option available to them from 6 April 2025 and will be subject to UK tax on their worldwide income and gains. Individuals who have been UK-resident for at least 10 out of the last 20 years, a decrease on the previously allowed 15 years, will also become subject to IHT on their worldwide estate, subject to transitional provisions. A 10-year ‘tail’ will follow these ‘long term residents’ on their departure from the UK meaning they cannot shake off their exposure to UK IHT for years after.

There are some transitional provisions in place, including a Temporary Repatriation Facility allowing former remittance basis users to bring funds to the UK for the next three years at a flat rate of 12% for the first two years, and 15% for the third. Options to rebase non-UK assets to their 5 April 2017 value to mitigate the CGT charge when taxed in the UK may be available, but ultimately the heyday of the long-term UK resident non-dom is truly over.

Those with children in the private and independent school system are also on the Chancellor’s hit list, with the much-debated levy of VAT applying to private school fees now confirmed from January 2025.

Smokers and vapers have not fared as well as the pint-drinkers, with a one-off rise in tobacco duty and the introduction of a flat rate of tax on vaping liquid from 1 October 2026, set at £2.20 per 10ml.

In a piecemeal offering on climate change, air passenger duty will also increase but capped at £2 for short-haul economy flights. Those with private jets, however, are perhaps not so lucky as the 50% uplift in the rate of air passenger duty equates to £450 per passenger per person, for example on a private flight from London to California.

Would you like to know more?

If you have any questions about the Government’s Autumn Budget and how it may impact you, please get in touch with your usual Blick Rothenberg contact or via the form below.

You can also visit our Budget Hub, where you can find our commentary and a range of insights to help you better understand how the Budget may affect you.

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