The much anticipated UK Budget 2024 delivered by the UK’s first female Chancellor of the Exchequer, Rachel Reeves, has been delivered and perhaps a reasonable summary is that it could have been a lot worse. Further detail is becoming available and keep an eye out for updates from our taxation team.
The smart money had been on capital gains tax and inheritance tax reforms and the Chancellor duly raised the lower and main rates of capital gains tax to 18% and 24% with immediate effect. The £1m lifetime limit for Business Asset Disposal Relief remains in place therefore any businesses in the process of, or shortly about to sell might be well advised to get a move on. Those eligible for BADR will pay 10% up to 5 April 2025, 14% from 6 April 2025 and 18% from 6 April 2026. Happily holdover reliefs for gifts were unaffected.
In a move clearly targeted at perceived wealth, the Chancellor has announced a limit on both Agricultural Property Relief and Business Property Relief to £1m, with any amounts over and above that being taxed at half the full rate of IHT, i.e. at 20%. On the positive side, the 7 year period for gifts was retained, with no changes to gifts out of income rules. These changes may well radically affect the succession thinking of hard working families in many sectors, including agriculture. For pensions, unspent pension pots will come into the inheritance tax net from 6 April 2027, a move bound to necessitate many families revisiting their strategy.
Finally for businesses, the employers NIC increase of 1.2% to 15% with effect from 6 April 2025 will come as a further bitter blow, particularly when allied to huge rises in the national minimum wage level, as well as the reduced threshold from which employers NIC applies. Whilst the increased Employment allowance is to be welcomed, this change will be a further blow to the already beleaguered hospitality and retail sectors. The only chink of light for businesses was the freezing of corporation rates, together with confirmation of no changes to full expensing and R&D rules.
Head of EQ Taxation, David Morrison, commented “We expected a raid on perceived wealth and unfortunately that has proven to be correct. The announced changes will require many to rethink their future gifting, investment and succession strategies, in particular affecting family businesses, agriculture and other high net worth individuals. The NIC rises too will affect many businesses in the retail and hospitality sectors, already reeling from the cost of living challenges. It’s disappointing to note that there seemed to be little good news for businesses to push on and expand and therefore it remains to be seen whether the UK business community can provide the growth to take the UK out of its current financial difficulties. However, there remain plenty of great businesses and ambitious owners who we back to propel our economy forward.”
Please keep an eye out for our Budget Summary link which will be available shortly.