On 30th October 2024, Chancellor Rachel Reeves delivered her first budget statement to Parliament, aimed at stabilising the economy and marking the start of a decade focused on national renewal. To support these goals, the budget outlines new debt regulations allowing additional borrowing alongside significant tax increases amounting to £40 billion.
Key Highlights:
- Immediate increases to capital gains tax rates, with further uplifts planned for some business disposals from April 2025 and April 2026.
- Instant raises in Stamp Duty Land Tax rates, including higher rates for those purchasing a residential property when they already own at least one dwelling.
- Confirmation that private school fees will be subject to 20% VAT beginning in the January 2025 term.
- From April 2025, many employers will face higher costs due to national minimum wage increases and substantial reforms to employers’ national insurance contributions.
- Revised policies on the use of double-cab pickup vehicles for business purposes, effective April 2025.
- Proposals to limit inheritance tax relief for agricultural and business properties starting in April 2026.
- Plans to include undrawn pension funds in an individual’s inheritance tax estate from April 2027.
Below, we discuss the Budget details and their impact on you.
INCOME TAX
Please note that each tax year ends on 5 April, so, for example, the 2025/26 tax year runs to 5 April 2026.
Personal Allowance Your tax-free personal allowance will stay at £12,570 for the 2025/26 tax year. For individuals with incomes above £100,000, the personal allowance will be gradually reduced and will be completely phased out for those earning over £125,140.
Income Tax Rates and Allowances For the 2025/26 tax year, income tax rates and thresholds will remain unchanged at their 2024/25 levels. After applying the tax-free personal allowance, the remaining income will be taxed in bands, as shown below for 2025/26:
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‘Other income’ refers to income that does not come from savings or dividends, such as salaries, bonuses, profits from sole trading or partnerships, rental income, pensions, and any other taxable sources.
Scottish Taxpayers If you reside in Scotland or are classified as a ‘Scottish taxpayer,’ different income tax rates and bands apply to your ‘other income.’ Once your personal allowance is deducted, the remaining income is taxed in bands as follows for 2024/25:
| 2024/25 | ||
| Starter rate | £1 – £2,306 | 19% |
| Basic rate | £2,307 – £13,991 | 20% |
| Intermediate rate | £13,992 – £31,092 | 21% |
| Higher rate | £31,093 – £62,430 | 42% |
| Advanced rate | £62,431 – £125,140 | 45% |
| Top rate | Over £125,140 | 48% |
The tax rates for 2025/26 will likely be announced at the Scottish Budget on 4 December 2024.
Welsh Taxpayers Welsh income tax applies if you live in Wales, and the rates set by the Welsh government generally align with main UK income tax rates and allowances, as seen in 2024/25. The Welsh Budget, due on 10 December 2024, is expected to confirm the 2025/26 rates.
Tax on Savings Income A savings allowance allows a certain amount of savings income to be taxed at 0% instead of the regular rates for savings income listed above. This allowance remains at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers in 2025/26. Income from Individual Savings Accounts (ISAs) remains tax-free.
Tax on Dividend Income A dividend allowance lets you receive a portion of dividend income tax-free before the standard dividend rates apply. This allowance is held at £500 for 2025/26. Dividends from a ‘stocks and shares’ ISA are still exempt from tax.
Individual Savings Accounts (ISAs) The 2025/26 ISA savings limit remains at £20,000, including up to £4,000 in a Lifetime ISA. The Junior ISA and Child Trust Fund limits remain at £9,000, with these ISA limits fixed until 2030. Plans for a new ‘British ISA’ allowance have been discontinued by the current government.
High-Income Child Benefit Charge (HICBC) You may owe the HICBC if you have a ‘high income’ and receive child benefit for a child living with you, regardless of whether you are the child’s parent. If you’re in a marriage, civil partnership, or long-term relationship, only the higher-income partner is liable for HICBC.
The child benefit ‘high-income’ threshold has been set at £60,000 since 2024/25. The charge is calculated at 1% of the child benefit received for every £200 over the threshold, meaning child benefit is completely clawed back when income reaches £80,000.
If preferred, the child benefit claimant may choose to opt out of receiving payments, which would exempt them from the HICBC.
The new government has decided not to move forward with prior plans to base the HICBC calculation on household income.
CAPITAL GAINS TAX
As anticipated, from 30 October 2024 (the date of the budget announcement), capital gains tax (CGT) rates have been increased for certain asset categories. The updated rates are as follows:
| 2025/26 | 2024/25 | ||
| Annual exempt amount | £3,000 | £3,000 | |
| From 30 October 2024 | Prior to 30 October 2024 | ||
| Rate of CGT on assets other than residential property and qualifying business disposals: | |||
| Within the basic rate band | 18% | 18% | 10% |
| Outside the basic rate band | 24% | 24% | 20% |
| Rate of CGT on residential property disposals: | |||
| Within the basic rate band | 18% | 18% | 18% |
| Outside the basic rate band | 24% | 24% | 24% |
| Rate of CGT on qualifying business disposals: | |||
| Business Asset Disposal Relief (BADR) lifetime limit | £1million | £1million | |
| Rate of CGT on gains qualifying for BADR | 14% | 10% | 10% |
Business owners will be pleased to know that Business Asset Disposal Relief (BADR) remains available on business sales. However, the CGT rate for BADR-eligible disposals will increase from 10% to 14% for disposals made on or after 6 April 2025, and further to 18% for disposals on or after 6 April 2026. These rates apply to the first £1 million of qualifying disposals.
NATIONAL LIVING WAGE (NLW) AND NATIONAL MINIMUM WAGE (NMW)
Employers must pay at least the NLW to employees aged 21 and over or the appropriate NMW rate to other workers, with rates varying based on age and whether the employee is an apprentice. The minimum hourly rates are updated each year on 1 April.
| 1 April 2025 – 31 March 2026 | 1 April 2024 – 31 March 2025 | |
| NLW – age 21 and over | £12.21 | £11.44 |
| NMW – 18-20 year old | £10.00 | £8.60 |
| NMW – 16-17 year old and apprentice | £7.55 | £6.40 |
The increases in the NMW rates for 18-20-year-olds (16.3%) and 16-17-year-olds and apprentices (18.0%) are significant, reflecting a step towards the Labour party’s goal of a consistent minimum wage for all adults. While this is a positive shift for workers, employers will need to factor in these increases when planning for staff costs in the coming year.
EMPLOYMENT TAXES
For Employees For the 2025/26 tax year, the rates and thresholds for national insurance contributions (NICs) paid by employees are as follows:
| Employees’ Class 1 NICs | 2025/26 | 2024/25 |
| Lower earnings limit (LEL) | £6,500 | £6,396 |
| Primary threshold (PT) | £12,570 | £12,570 |
| Upper earnings limit (UEL) | £50,270 | £50,270 |
| Earnings between the LEL and the PT | 0% | 0% |
| Earnings between the PT and the UEL | 8% | 8% |
| Earnings above the UEL | 2% | 2% |
Earnings below the LEL are exempt from primary Class 1 NICs and do not contribute towards state benefits. However, earnings between the LEL and PT do qualify for state benefits and are subject to primary Class 1 NICs, albeit at the 0% rate.
For Employers Several changes to employers’ Class 1 NICs will come into effect on 6 April 2025:
- An increase in the employers’ NICs rate from 13.8% to 15%.
- A reduction in the ‘secondary threshold’—the point at which employers start paying NICs on each employee’s wages—from £9,100 to £5,000.*
- A rise in the ‘employment allowance’ that qualifying employers can offset against their Class 1 NICs liability, increasing from £5,000 to £10,500. Previously, only employers with a Class 1 NICs liability under £100,000 in the previous tax year were eligible for this allowance, but this restriction will be lifted for 2025/26.
*Note: A higher secondary threshold of £50,270 applies for employees under 21 and apprentices under 25, with some other variations possible.
These increased NIC costs may place pressure on businesses, potentially impacting wage growth for employees or leading to increased prices for consumers. Employers will need to balance these additional costs against their overall wage budgets.
Benefits in Kind Certain non-cash benefits provided to employees, such as company cars, are taxable. For the 2025/26 tax year, employers will also be liable to pay Class 1A NICs at a rate of 15% on the value of these benefits, up from 13.8% in 2024/25.
The taxable value of a company car is calculated as a percentage of its list price at registration, with the rate depending on carbon emissions or, for electric cars, the vehicle’s range. These percentages will increase gradually until 5 April 2028, with a 1% increase in 2025/26. This means employees with company cars will see a rise in their tax obligation. More substantial changes are scheduled to impact the percentages from 2028/29 onwards.
The benefit calculations for employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) will increase in line with inflation for 2025/26:
| 2025/26 | 2024/25 | |
| Van benefit | £4,020 | £3,960 |
| Van fuel benefit | £769 | £757 |
| Car fuel benefit multiplier | £28,200 | £27,800 |
The tax treatment of double-cab pick-up vehicles with a 1-tonne payload or more has been clarified: vehicles not primarily designed for transporting goods will be classified as cars for benefit-in-kind purposes. However, vehicles bought or ordered before 6 April 2025 can be considered vans for tax purposes until disposal, lease end, or 5 April 2029, whichever is sooner.
Tip: For those considering a double cab pick-up vehicle with a 1-tonne payload, purchasing or ordering it before 6 April 2025 may allow you to benefit from the more favourable tax treatment applicable to vans.
From April 2025, the official rate of interest (currently 2.25%) for calculating benefits on employment-related loans and accommodation will be reviewed quarterly instead of annually.
Beginning 6 April 2026, reporting and paying tax on benefits in kind via payroll software will become mandatory, with the exception of employer-provided loans and accommodation. Employers may choose to ‘payroll’ these benefits voluntarily.
BUSINESS TAX
Motor Vehicles From April 2025, most double cab pick-up vehicles with a payload of at least one tonne will need to be classified as cars for capital allowances, rather than goods vehicles. This new approach is less favourable for deductions. However, businesses that entered contracts before 1 April 2025 (for companies) or 6 April 2025 (for non-corporate businesses) and incur the expense by 1 October 2025 may still classify these vehicles as goods vehicles.
Additionally, the budget extended the 100% first-year allowance for zero-emission cars until 31 March 2026 (for corporation tax) and 5 April 2026 (for income tax).
Making Tax Digital (MTD) for Income Tax Under the MTD initiative, businesses must use compatible software to keep digital records and submit quarterly income and expense summaries to HMRC. This will roll out in stages from April 2026, beginning with tax-paying sole traders and property landlords with combined trade and rental incomes over £50,000. This threshold will lower to £30,000 in April 2027 and to £20,000 by the end of this parliamentary. Voluntary testing of this system with HMRC is currently available.
Electronic Invoicing In Spring 2025, the government will open a consultation on e-invoicing, seeking to encourage business adoption and investment in this area as part of a broader digitalisation strategy. E-invoicing is expected to become mandatory in the future.
Business Rates For the 2025/26 year, retail, hospitality, and leisure (RHL) businesses will receive a 40% relief on their business rates. Additionally, the small business tax multiplier for properties with a rateable value under £51,000 will remain frozen.
Looking ahead, the government plans to lower rates permanently from 2026/27 for RHL properties with values below £500,000.
NATIONAL INSURANCE FOR THE SELF-EMPLOYED
Self-employed individuals are subject to Class 2 and Class 4 National Insurance Contributions (NICs). The relevant thresholds are:
| 2025/26 | 2024/25 | |
| Class 2 NICs per year – mandatory* | £nil | £nil |
| Class 2 NICs per year – voluntary* | £182.00 | £179.40 |
| Small profits threshold (SPT) | £6,845 | £6,725 |
| Lower profits limit (LPL) | £12,570 | £12,570 |
| Upper profits limit (UPL) | £50,270 | £50,270 |
| Class 4 NICs on profits below the LPL | 0% | 0% |
| Class 4 NICs on profits between the LPL and the UPL | 6% | 6% |
| Class 4 rate on profits above the UPL | 2% | 2% |
* From 2024/25 onwards, Class 2 NICs are effectively abolished. If trade profits exceed the SPT, the individual will accrue entitlement to state benefits such as the state pension. However, if trade profits fall below the SPT, the individual will need to pay Class 2 NICs voluntarily if they need the tax year to qualify for state benefit purposes.
TAX REGIME FOR FURNISHED HOLIDAY LETS
From April 2025, furnished holiday lets (FHL) will be taxed similarly to other rental income. Key impacts include:
- Loan Interest: Owners will receive a 20% tax credit rather than a full deduction.
- Capital Gains Tax (CGT): Gains on FHL disposals will now be taxed at investment rates (18% or 24%) rather than the business asset rate.
- Rollover Relief: CGT rollover relief will only apply to disposals under compulsory purchase orders.
- Capital Allowances: The allowance for FHL property improvements will end, though current allowances will remain in effect.
- Pension Contributions: FHL profits will no longer qualify as “relevant earnings” for pension tax relief.
Options for FHL owners include selling or gifting the property before April 2025, restructuring into a company, or retaining the property as a rental asset under the new rules. Each option has tax implications, so please contact us for individual advice.
VAT
From April 2025, the VAT registration and deregistration thresholds will stay at £90,000 and £88,000, respectively. The VAT rate remains 20%.
Additionally, private school fees, previously VAT-exempt, will now be subject to 20% VAT starting in the January 2025 school term.
CORPORATE TAXES
Rates from 1 April 2025
Corporation tax rates and thresholds for the financial year to 31 March 2026 remain unchanged as follows:
| Financial year to 31 March 2026 | |
| Main rate | 25% |
| Small profits rate | 19% |
| Small profit threshold | £50,000 |
| Main rate threshold | £250,000 |
| Marginal relief fraction | 3/200 |
| Effective marginal relief rate | 26.5% |
Roadmap
The government has outlined a corporate tax roadmap with commitments to:
- Retain the current tax rates as shown above, including small profits rate, and marginal relief.
- Maintain the annual investment allowance, offering 100% tax relief on up to £1 million of qualifying assets each year.
- Continue with the full-expensing regime for qualifying plant and machinery acquisitions. giving 50% or 100% tax relief on the acquisition of new and unused qualifying plant and machinery, without limit.
- Preserve existing Research & Development (R&D) tax relief rates.
Research & Development (R&D) Reliefs: The R&D tax relief regime has seen a lot of change in recent years, and the Labour government is committing to the current rates of relief. Since 1 April 2024, this equates to a 20% taxable contribution from HMRC on qualifying R&D expenditure in the “merged scheme” (used by most claimant companies) and, for ‘loss-making R&D intensive SME companies’, an 86% uplift in deductible qualifying expenditure with a 14.5% payable tax credit.
An R&D intensive company is one that qualifies as an SME and at least 30% of its total expenditure is invested in R&D.
Annual Tax on Enveloped Dwellings (ATED) Companies and certain other entities holding UK residential property valued over £500,000 are subject to ATED. Rates will increase from 1 April 2025.
PENSIONS
INHERITANCE TAX
The main rate of IHT remains at 40%, reduced to 36% for estates where 10% or more is left to charity.
The IHT nil rate band will continue to be frozen at £325,000 until 2030. The additional nil rate band for passing on the family home to direct descendants (residence nil rate band) will also remain at £175,000 until 2030. This means that married couples and civil partners will typically not pay inheritance tax where their combined estate is valued below £1 million. Note however that the residence nil rate band continues to be tapered where the value of the estate exceeds £2 million.
Gifts made by an individual in the 7 years prior to their death are classed as ‘potentially exempt transfers’ and can give rise to an IHT liability on death. Despite speculation in the run up to the budget, there will be no changes to this regime. Additionally, taper relief continues to apply, reducing IHT payable where there are more than 3 years between the date of the gift and the date of death.
As mentioned above, it is proposed that, from April 2027, most undrawn pension funds and death benefits will be included within the value of a person’s estate for IHT purposes.
Farmers and business owners
The government is proposing to reform IHT agricultural property relief (APR) and business property relief (BPR) from 6 April 2026. Relief of up to 100% is currently available on qualifying business and agricultural assets with no financial limit.
From 6 April 2026, it is proposed that 100% relief will only apply to the first £1 million of combined agricultural and business property, with the relief reducing to 50% on the value that exceeds £1 million. This means the relief will be focused on small family farms and businesses.
In a further proposed change, the rate of BPR available for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM, will be reduced from 100% to 50%.
As an anti-forestalling measure, the new rules will apply to lifetime transfers made on or after 30 October 2024 if the donor dies on or after 6 April 2026.
UK RESIDENCY AND DOMICILE
Significant tax changes have been announced for UK resident non-domiciled individuals; namely those individuals spending most of their time in the UK but without permanently settling here. The concept of ‘domicile’ will be removed from the UK tax system and replaced by a regime based on years of tax residence.
Income and capital gains taxes
At present, individuals who are both resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains. However, for UK resident non-domiciled individuals, they are able to claim a ‘remittance basis’ of taxation for their overseas income and capital gains and only pay UK taxes to the extent they remit (bring) the associated funds to the UK. To access this favourable tax treatment, non-domiciled individuals may be required to pay an annual ‘remittance basis charge’ of up to £60,000.
The concept of domicile and the remittance basis of taxation will be abolished from 6 April 2025, meaning all UK residents will default to being taxed in the UK on their worldwide income and gains. However, a 100% relief from tax on foreign income and/or capital gains will be available to individuals in their first 4 years of UK tax residence. It is worth noting that if a ‘newly arrived’ individual claims this relief, they will sacrifice their UK personal allowance and CGT annual exemption, along with their ability to claim relief for some foreign losses.
From April 2025, for employed individuals eligible for the 100% relief from UK taxation on their foreign income and/or capital gains, an ‘overseas workday relief’ will remain available in relation to their duties performed overseas. Reforms to the regime will however take place, bringing increased flexibility for some but also a new maximum cap on the relief equal to the lower of £300,000 and 30% of total employment income.
Inheritance tax
Currently inheritance tax applies to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK-situated assets of a non-domiciled individual.
From 6 April 2025, individuals resident in the UK for at least 10 out of the last 20 tax years, will be subject to inheritance tax on both their UK and non-UK assets. They will then remain within the full scope of UK inheritance tax for between 3 and 10 years after leaving the UK.
Please contact us if you have not always lived in the UK to find out how the new rules will affect you. There may be some exemptions or transitional reliefs that we are able to claim to support your position, including a ‘temporary repatriation facility’ for any overseas funds you may have and ‘re-basing’ any overseas assets you hold to their April 2017 values to reduce any UK capital gains tax arising in 2025/26 and onwards.
STAMP DUTY
England and Northern Ireland – thresholds
It has been confirmed that the 0% thresholds for Stamp Duty Land Tax (SDLT) will be reduced from 1 April 2025 as follows:
| From 1 April 2025 | 1 April 2024 to 31 March 2025 | |
| Main threshold | £125,000 | £250,000 |
| First-time buyers’ threshold | £300,000 | £425,000 |
SDLT on additional dwellings such as second homes
For transactions with an effective date (generally the date of completion) on or after 31 October 2024, the higher rates of SDLT payable by purchasers of ‘additional dwellings’ (i.e. when they already own one dwelling), and by companies, increases from 3% to 5% above the standard residential rates. This measure is clearly targeted at buy-to-let landlords and those acquiring second homes.
The rate of SDLT payable by companies and non-natural persons (e.g. trusts) acquiring dwellings for more than £500,000 increases from 15% to 17% also from 31 October 2024.
Scotland and Wales
Property purchasers in Scotland and Wales do not pay SDLT. Rather, if you buy a property in Scotland you pay Land and Buildings Transaction Tax, and in Wales you pay Land Transaction Tax. No amendments to these transaction taxes have yet been announced.
DEALING WITH HMRC
Interest on unpaid tax liabilities
From 6 April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%.
IN CONCLUSION
As we near the 2025/26 fiscal year, many of our clients will be evaluating how the budget affects their financial situations. Some may find advantages in the boost to public spending, while others—particularly employers and business owners—might need to reassess and revise their business strategies for 2025 and beyond. Please keep in mind that we are here to support you in achieving both your business and personal objectives. Don’t hesitate to reach out if there’s anything you wish to discuss.
Disclaimer: This newsletter covers the key news headlines from the Autumn Budget 2024. It is not exhaustive and should not be read as a full fiscal summary. The content displayed is correct as of 31 October 2024. We cannot take responsibility for any action taken or not taken from this document alone. Please contact us for personalised advice.