AUTUMN BUDGET 2024 - More pain than pleasure...
As expected, Labour's first Budget in 14 years has proved to be a stinger, particularly for small business owners.
What are the headlines?
Income tax and National Insurance
The headline, of course, is the double blow to employers with regard to National Insurance Contributions. The employer's rate is being increased from its current level of 13.8%, to 15%. In addition, whereas this previously only applied to workers earning above £175 per week, the threshold has been lowered to include employees earning £96.15 per week. The Chancellor attempted to soften this announcement by doubling of the Employers’ Allowance from £5,000 to £10,500, however, it is inevitable that the majority of employers will still be out of pocket.
Benefits in kind are to be exclusively payrolled from April 2026.
And a stern warning to buiness owners of Double Cab Pick Ups (DCPUs - such vehicles with a payload of 1 tonne+ are currently treated as vans). Following on from the Tories failed attempt earlier this year to recategorise DCPUs as cars for benefit in kind and capital allowances purposes, it would appear that the new Labour government are going to force changes as of April 2025.
Capital Gains Tax (CGT)
Rates of capital gains tax are increasing in line with rates for residential property (basic rate from current 10% to 18%, and higher rate from current 20% to 24%).
Business owners will further feel the impact of increases, following a short term freeze on Business Asset Disposal Relief (formerly Entrepreneurs Relief), as the tax rate on these disposals will rise to 14% in 2025 and 18% in 2026.
Inheritance Tax (IHT)
Inheritance Tax did not escape, and seemingly the greatest impact will be felt by the farming industry. Those who have previously benefited from Business Property and Agricultural Property Reliefs will have to deal with the combined limit being restricted to the first £1 million, with anything over that being subject to only 50% relief, creating an effective rate of 20% tax on agricultural and business property on death over the £1 million limit.
Other changes were announced with regard to the inclusion of unused pension funds into estate valuations (backdated to 6 April 2017), and a reduction in tax relief on AIM share portfolios (from 100% to 50%).
Stamp Duty Land Tax (SDLT)
Individuals, companies and other non-natural persons purchasing residential property in England and Northern Ireland are going to feel the pinch right away, with measures increasing higher rates of SDLT, applying from 31 October 2024 - anywhere from 5% to 17% depending on the purchase price.
Anything else?
Non-dom status is to be replaced with a residence based regime.
Oh, and you'll get a penny off a pint!
So, what now? Is there anything we can do?
With regard to CGT, the almost doubling of BADR rate to 18% in 2026 may affect your decision on when to sell your business.
And from an IHT point of view, if Wednesday's announcement makes it more likely that tax will be payable (whereas it wasn't before), there may be difficult decisions to be made around gifting the family business or farm to the next generation during your lifetime, or alternatively budgeting to cover the tax burden.
So, it's perhaps never been as important to talk through where you are in terms of your business cycle, or to get your estate valued (including your business, farmland, pensions and AIM shares) in order to ascertain how the changes affect you...
... and Aubrey Campbell & C0 are here to help.
If you want to chat through any of the above, please do not hesitate to reach out to us. Our chartered tax consultant, Alastair King can be contacted as follows:
T: +44 (0) 28 9038 2646
E: alastair@acaccounts.com