UK Autumn Budget 2024: Key Announcements

KEY ANNOUNCEMENTS & HOW THEY MAY IMPACT YOU

The last 3 months have been full of speculation about what will be announced in today’s Autumn Budget - and thankfully, all of the speculation ended today with the Budget Speech from the Chancellor - Rachel Reeves. 

Ruzwan Boota, Tax Director at I Will Solicitors Ltd provides a breakdown below of the key announcements, and how they may impact you. 

‍(I Will Solicitors Ltd is a wholly owned subsidiary of Wahed Inc. They provide Islamic Wills, Probates and Tax Advisory services).

1. Capital Gains Tax (CGT):

• Residential Properties - CGT rates remain the same at 18% and 24%;
• All other capital assets - CGT rates increased to 18% and 24% for disposals on or after 30 October 2024;
• For business owners, Business Assets Disposal Relief (BADR) (formerly known as Entrepreneurs Relief) CGT rate will stay at 10% until 5 April 2025, but will then increase to 14% for disposals on or after 6 April 2025, and 18% for disposals on or after 6 April 2026.

How it may impact you:

‍Overall, the changes were as we expected - not going too high on CGT rates and factoring in delayed implementation (for BADR) to incentivise disposals of businesses pre-April 2025. ‍Anyone looking to dispose of businesses should look to do so before April 2025 &/or consider alternative structuring to take advantage of valuable exemptions on disposals. Reach out for a discussion to find out more about your options on this.

2. Inheritance Tax (IHT):

• Changes to the non-domicile rules from April 2025;
• Changes to Business Relief from April 2026;
• Threshold freeze extended to 2030.

How it may impact you:

‍The changes to the non-domicile rules may catch those individuals who are currently classed as non-UK domiciled to be classed as UK domiciled for the purposes of inheritance tax. If you are UK domiciled, you are taxed for UK inheritance tax purposes on your worldwide assets, whereas if you are non-UK domiciled, you are only taxed on your UK-situs assets. Further, the changes will prevent the use of offshore trusts to protect assets against IHT.

‍‍Business Relief is a very valuable Inheritance Tax relief that help individuals who own trading businesses to transfer or bequest their businesses tax-free to their children and family members. Following the changes announced in the Budget, the amount that can be inherited tax-free is limited to £1m and for businesses valued at more than £1m, the excess only qualifies for 50% relief. It is therefore important for business owners to seek tax advice and make the most of the 100% tax relief now, before the law changes.

3. IHT on un-used Pensions:

• Unused pensions to be brought into Inheritance Tax (IHT) net from April 2027.

How it may impact you:

‍Pensions usually do not form part of your estate and therefore your beneficiaries can inherit your pension inheritance tax-free, or at their marginal income tax rate which is often at the 20% basic rate. From April 2027, unused pension funds and death benefits will be brought into the estate for inheritance tax purposes, therefore significantly increasing the IHT liability and reducing the net amount the beneficiary receives.

This change will not only impact high-income households but now push middle-income households with a home and pension savings over the IHT threshold, making more estates subject to IHT than before​.

More details are to be provided in due course and there may still be planning options to reduce the tax liability.

4. Employer National Insurance Contributions (NICs):

• Increase in Employer NIC rate from 13.8% to 15%; 
• Threshold on which Employer NICs will be paid will be reduced from £9,100 to £5,000; 
• Increase in employment allowance from £5,000 to £10,500.

How it may impact you:

‍Some help for smaller businesses with the employment allowance, but many employers will see an increase in cost of employing workers effective from 6 April 2025. Employers should consider salary sacrifice arrangements for employees to manage the impact of this wherever possible.

5. Stamp Duty Land Tax (SDLT):

• Increase in the surcharge levied on additional residential property acquisitions from 3% to 5% (effective from 31 October 2024);
• Note that thresholds will also change effective from 1st April 2025 such that SDLT is paid on additional residential properties with a value in excess of £125,000 (current threshold is £250,000).

How it may impact you:

‍Anyone looking to purchase additional residential properties will incur additional SDLT charges, whether acquired in personal name(s) or via a limited company. You will need to factor this cost into property acquisitions going forward.

6. Corporation Tax:

• The rate of Corporation Tax will be capped at 25% for the remainder of this Parliament;
• Also £1m of Annual Investment Allowance will remain intact, along with R&D Reliefs. 

How it may impact you:

‍This gives certainty for businesses in the UK from a corporation tax perspective so that they can plan growth over the next few years.

7. Income Tax Thresholds:

• Income Tax thresholds will rise from 2028/29 tax year onwards in line with inflation.

How it may impact you:

‍Whilst this is good news, many people will find themselves falling into the higher tax bands between now and April 2028 due to fiscal drag. So the status quo remains for the next few years unfortunately.

8. VAT on school fees:

• From 1 January 2025, all education services provided by a private school or connected person will be subject to VAT at the standard rate of 20%; Pre-payments of fees or boarding services on or after 29 July 2024 that relate to terms starting on or after 1 January 2025 will also be subject to VAT at the standard rate.

How it may impact you:

‍We knew that this was coming, so nothing new here. More clarity needed on what constitutes a private school. For example, will home school support centers or other educational institutes be caught (for example, Islamic Institutes, Dar Ul Uloom’s, etc.). We will need to trawl through the policy details to see who will/will not be caught by this. Please reach out if you would like more information in this regard.

9. Tax on refinancing of Shariah Compliant Mortgages (Alternative Finance Arrangements):

• Buried in the announcements were details on changes to ongoing issues where HMRC have sought to charge capital gains tax and corporation tax on refinancing of Shariah Compliant Mortgages; 
• In the next Finance Bill, HMRC have agreed to provide a level playing field for those using alternative (e.g. Shariah Compliant) and conventional refinancing arrangements. This will apply to the taxation of gains in personal hands (capital gains tax) as well as in companies (corporation tax). 

How it may impact you:

‍Whilst this is welcome for Shariah Compliant refinancing going forward, there is a big caveat - the changes will take effect from 30 October 2024. So all those that have had notices from HMRC seeking capital gains tax/corporation tax on historical refinancing arrangements appear to still be chargeable to tax. This is a real shame as there was hope that this would apply retrospectively too.

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Want to discuss what actions you can take to navigate the changes?

If you would like to discuss planning opportunities in the wake of the Budget, we are offering free 30 minute meetings with Ruzwan Boota and Wahed’s Head of Private Clients Services UK, Abul Fazal Salahuddin. If you would like to book in a meeting, please do so using the following link.

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Note that only some of the key announcements have been summarised in this blog. There are many others that may impact you depending on your circumstances. Therefore please do reach out to Ruzwan Boota should you wish to find out more information on the many tax changes that have been announced in the Autumn Budget 2024.

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