Autumn Budget 2024- Key Analysis By Tax Care

Budget 2024 summary-

Personal:

Capital Gain Tax:

1. Capital gain tax on shares increases from 10% to 18%, from 20% to 24% respectively.

Effective date: 30 October 2024.

Impact: This change will impact a huge number of investors in the UK. Those investors who own a company’s share in the UK would expect an 80% rise on their tax bill if they are basic rate taxpayers or 20% rise if they are higher rate taxpayers. This will not affect those employees who opted for the company’s tax free share scheme.

Tax Care Comment: The tax free allowance still remains unchanged which is £3000.

If you are planning to sell your company’s share, we would recommend gifting some of the shares to your family members and utilising their tax free allowances. You can also save on your tax bill by spreading your shares over multiple years.

2. CGT on residential property is unchanged at 18% and 24%.

Effective date: April 2024

Impact: there are no major changes of tax implication to the landlord who are planning to exit.

Tax Care Comment: We were anticipating capital gain tax to be set to 33%-39%, as a part of pre-budget discussion. However, it’s a relief for landlords who were worried about the sudden jump on their tax bill. Although there are no major changes, stamp duty surcharge will cause extra pressure on landlords. Stamp duty may force the property price to go down.

3. Business asset disposal relief has been increased from 10% to 14%.

Effective date: April 2025

Impact: Various business owners and farmers would be required to pay an additional 4% when they sell/transfer their business assets.

Tax Care Comments: BADR new rate is effective from 6 April 2025. It is expected to increase to 18% from 6 April 2026. If you are planning to sell your business, we would recommend selling it by 5 April 2025 to get the full benefit of BADR.

Inheritance Tax:

1. Listed company shares that were exempt previously are not taxed at 20%.

Effective date: April 2025

Impact: wealthy individuals used to refinance their properties and invested financed onto listed shares on the stock market. It helped them to save 40% IHT tax bill. However, this can no longer be applied. A 20% IHT will be applied on transfer of those shares.

Tax Care Comment: Tax free allowance for IHT is £325,000. Therefore, you probably do not require to pay IHT. There is no IHT tax to pay if the shares are transferred 7 years before the death. Taper tax relief is also available on IHT on those shares which are transferred before 7 years.

2. The IHT tax relief business asset ownership is reduced to £1m.

Effective date: 6 April 2025

Impact: These changes will impact family run businesses and farms who would have received more tax free allowance for passing the business onto next generations. For example, if one of your family members owns a farm or a freehold restaurant that is worth £2m, you will expect to pay £400K on IHT, if you do not have an IHT plan in place.

Tax Care Comment: An unexpected rise of IHT will significantly impact families who wish to pass their business onto their next generations. We would recommend speaking to an IHT expert to minimise your IHT. You can minimise it by transferring it to a trust or gifting the assets to your loved ones as early as possible. You can also add your children as a shareholder and offer them share shames.

– Non-dom status: if you are a non-domiciled in the UK, you are required to declare your tax overseas inheritances. This also applies to non-dom trusts.

Effective date: April 2025

Impact: Non-domicile status became very famous in the UK when the former prime minister’s wife was exercising non-dom status to avoid paying tax on inheriting her father’s billion pound worth of wealth. However, non-dom status rules can no longer be applied that include established offshore trustees. This will hugely impact wealthy individuals and it may force them to exit the UK for tax purposes.

Tax Care comment:

The non-domiciled status is effective from April 2025. There are few tax exemption available which includes the followings:

• Two years tax relief transition for those who are already claiming non-dom status
• 4 years tax relief to bring their overseas properties to the UK for those who will move to the UK. For example, if you have moved to the UK from Hong Kong in August 2025. You will have 4 years to sell your overseas home in Hong Kong and bring the fund in the UK without paying tax.
• Overseas working day relief is also available.

Stamp Duty on Second Property:

Stamp duty surcharge is increased from 3% to 5%.

Effective date: with an immediate effect from 30 October 2024.

Impact: These surprising changes will impact landlords who are planning to purchase a property or who are already in the process of completion. For example, if you are purchasing a property for £300K and expected completion date is on 5 November 2024, you will be paying an additional £6K as stamp duty surcharge a total of £17,5K.

Tax Care Comment: Stamp duty will have a negative impact on the property market negatively. It will force the property price to go down and increase the rent. At Tax Care we work with a huge number of landlords who are planning to exit by selling their properties. A rise in stamp duty will cause further burden on the property market.

Business Tax: Stamp duty rise with an immediate effect is a total surprise. Stamp duty is not increased on commercial properties. UK landlords may benefit from purchasing commercial properties under £250K.

Business:

Employer NI :

1. Employer NI is set to increase from 13.8 % to 15%.

Effective date: April 2025

Impact: on average the UK SME owners are expected to see 10-12% rise on their employer NI tax bill. It will impact a significant number of businesses who are struggling with the high rise of cost of running business.

Tax Care Comment: Government has offered a tax relief to small business owners by increasing tax free employment allowance. However, a rise of employer NI will encourage UK businesses to outsource some of their activities. This may also encourage employers to recruit self-employed individuals.

2. Employer tax-free NI threshold is reduced to £5000 which was £9,100 previously.

Effective date: April 2025

Impact: With these changes the employers are expected to pay an additional tax bill of £615 per employee.

Tax Care Comment: The government is bridging the budget deficit of £20 billion by increasing employer NI. However, these changes may encourage UK employers to outsource or to recruit self-employed/limited companies.

Employer Allowance:

Employer allowance is increased to £10,500 which was £5000 in the last two tax years.

Effective date: April 2025

Impact: these changes will help small business owners to reduce their employer NI.

Tax Care Comment: This is the only positive change made by this government in the current budget so far. This will help thousands of small businesses in the UK.