On 30th October 2024, Chancellor of the Exchequer Rachel Reeves delivered the widely anticipated first Labour Budget since 2010 accompanied by a full fiscal statement from the OBR (Office for Budget Responsibility).
As speculated, the Budget had an overall emphasis on increased spending on public services and investment, estimated to come to around an additional £70 billion a year. The tax measures announced by the Chancellor are expected to fund over half of that increased public expenditure, with the remaining spending to be funded via government borrowings.
You can view the full Autumn Budget 2024 here.
Some of the most significant measures announced for businesses and business owners were as follows:
Capital gains tax (CGT) increased from 30th October 2024
As many had predicted, the chancellor announced that the main rates of capital gains tax (CGT) that apply to assets (other than residential property and carried interest) will be increased.
- For disposals made on or after 30 October 2024, the lower rate of CGT will rise from 10% to 18%, and the higher rate from 20% to 24%.
These changes will increase the tax payable on disposals, equalising the tax rates for residential property and non-residential property.
BADR (Business Asset Disposal Relief), Investors’ Relief (IR) rates to rise
There are two reliefs which offer access to a lower rate of CGT: Business Asset Disposal Relief (BADR), and Investors’ Relief (IR).
- The rate for both BADR and IR will increase gradually, to give business owners time to adjust to the changes. The BADR and IR rates (both currently 10%) will rise to 14% from 6 April 2025, and 18% from 6 April 2026.
- From 30 October 2024, the lifetime limit for investors relief will reduce from £10 million to £1 million. The £1 million limit for BADR will remain the same.
The changes mean that some individuals looking at selling their businesses or qualifying investors will face significant tax rises for a sale made after 6 April 2025. This could encourage business owners who are looking to sell in the future to consider selling earlier to benefit from the current lower tax rates.
National insurance contributions (NICs) to rise for employers
From 6 April 2025:
- The rate of employers’ NICs will rise by 1.2% to 15%.
- The level at which employers start paying NICs for each employee will fall from £9,100 to £5,000.
Although NICs paid by employees will not change, this will significantly increase the financial burden on employers with economists indicating that this could lead to reduced recruitment and lower than expected pay rises for staff next year.
Corporate Tax Roadmap
The Government aims to provide “certainty that encourages investment and gives businesses the confidence to grow” by setting out scheduled changes to business taxation for the duration of this Parliament by publishing a Corporate Tax Roadmap.
Of note, it was announced that the main rate of corporation tax, paid by businesses on taxable profits over £250,000, would stay at 25%, the lowest in the G7, for the duration of the Parliament.
For more information, please contact our Corporate and Commercial department on 0345 646 0406 or fill in our online enquiry form and a member of the team will be in touch.