Labour Budget October 2024

Well, the first labour budget in fourteen years has been delivered.

As predicted, it is controversial, with National Insurance and Capital Gains Tax as the central part of tax increases.

Here are the bullet points of the main points. A full briefing will be issued in a few days.

Here’s a more detailed breakdown of the main tax changes introduced in the Autumn Budget 2024:

• Employer National Insurance Contributions (NICs):
• Rate Increase: Employer NICs will rise by 1.2 percentage points, from 13.8% to 15%, effective April 2025.
• Threshold Reduction: The earnings threshold for employer NICs will be reduced from £9,100 to £5,000 per employee per year, increasing the tax burden on businesses, especially larger employers.
• Employment Allowance: To offset this impact on smaller businesses, the Employment Allowance (which reduces NICs bills for eligible businesses) will be raised from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed, expanding its applicability to more businesses.
• Capital Gains Tax (CGT):
• Increased Rates: The lower rate of CGT is increasing from 10% to 18%, and the higher rate from 20% to 24%, effective April 2025. This increase aims to ensure that gains on investments contribute more to government revenues.
• Business Asset Disposal Relief (BADR) and Investors’ Relief: The preferential CGT rates for BADR and Investors’ Relief will rise gradually to 14% by April 2026, to align closer to the new general CGT rates. This gives business owners a two-year transition period to adjust.
• Inheritance Tax (IHT):
• Unspent Pension Pots: Unused pension pots will now be included in the IHT calculation, increasing tax liabilities for beneficiaries of pension wealth.
• Agricultural Property Relief (APR) and Business Property Relief (BPR): Restrictions will be introduced to limit APR and BPR eligibility, particularly impacting larger estates. This measure aims to close loopholes often used to shelter high-value assets from inheritance tax.
• Air Passenger Duty (APD):
• Rate Increases: APD will increase by £2 for economy-class flights to short-haul destinations, while APD for private jets will see a significant 50% rise.
• Expansion of APD Scope: The government is considering broadening the definition of private jets for APD, potentially including more high-end, short-term chartered flights.
• Vehicle Excise Duty (VED):
• Incentives for Electric Vehicles (EVs): VED First-Year Rates for EVs will remain lower than those for hybrids and traditional combustion engines, reinforcing the incentive to purchase low-emission vehicles.
• Company Car Tax: EVs will continue to benefit from favorable Company Car Tax rates to promote cleaner fleet purchases.
• Extension of EV Allowances: 100% First-Year Allowances for zero-emission cars and EV charge points will be extended for an additional year, encouraging businesses to adopt EVs and install charging infrastructure.
• Stamp Duty Land Tax (SDLT):
• Higher Rates for Additional Dwellings: The SDLT surcharge for additional property purchases (like second homes and buy-to-let properties) will increase from 3% to 5%, effective 31 October 2024. This hike is targeted at high-income property investors and aims to reduce speculative buying in the housing market.
• Energy Profits Levy (EPL):
• Rate Increase and Allowance Removal: The EPL on oil and gas companies will rise from 35% to 38%, and the previous 29% investment allowance will be eliminated, making the effective EPL rate among the highest in Europe. The levy, initially introduced as a temporary measure, will be extended until March 2030.
• Stability for Transition Investments: While the investment allowance is removed, the government maintains a 100% first-year allowance for EPL-related investments to aid the energy sector in transitioning to renewable energy sources.
• Corporate Tax Roadmap:
• Corporation Tax Rate Cap: Corporation tax is capped at 25%, which, while still lower than rates in the rest of the G7, provides predictability for businesses in the UK and aligns with efforts to stabilize tax policy over this Parliament’s term.
• VAT on Private School Fees:
• VAT Implementation: VAT will now apply to private school fees to align the sector with other VAT-liable services. Revenue from this measure will help fund government priorities in public education and youth programs, aiming to bridge the gap between public and private education sectors.
• Stamp Duty on Second Homes and Buy-to-Let Properties:
• Higher Rates for Additional Properties: To cool the housing market for high-income earners, the government is increasing the additional property surcharge from 3% to 5% on second homes, buy-to-let properties, and corporate property purchases. This measure also intends to alleviate housing affordability issues by dampening speculative investment.

These tax changes reflect the government’s dual focus on raising revenue to fund public services and reducing tax advantages for wealthier individuals and sectors. More specific information is to follow.