Noteworthy transformations in the UK tax system are proposed through the 2024 Budget. Solely focusing on improved public services, housing, employment support, and more unbiased wealth distribution. Here, we break down some of the most notable changes in several areas of tax and policy, hence you can see how these updates can impact you.
National Insurance Contributions (NIC)
Starting April 2025, employer NIC rates will see a rise:
- The rate will increase by 1.2%, bringing it up to 15%.
- The National Insurance Contribution threshold will decrease significantly, from £9,100 to £5,000. This lower threshold means employers will experience higher NIC expenses.
To mitigate these costs, the Employment Allowance will double from £5,000 to £10,500, giving small businesses some relief. Employers with NIC obligations up to £10,500 may avoid these rate increases and might even see a slight financial benefit.
Income Tax on Capital Gains Tax (CGT)
Income Tax thresholds are to be implemented to increase in line with inflation beginning in the 2028/29 tax year. The purpose of this adjustment is to keep more taxpayers out of higher tax brackets as wages increase.
Update for Capital Gains Tax (CGT) Changes are scheduled for October 30, 2024
- The rate of tax on capital gains will be increasing, with the lower rate rising from 10% to 18%, and the higher rate rising from 20% to 24%.
- Business Asset Disposal Relief and Investors’ Relief — the current rates will slowly rise, to 14%, by April 2025, and to the new 18% rate by April 2026.
Changes to Stamp Duty Land Tax (SDLT)
For those purchasing additional properties, the SDLT surcharge will increase:
- The surcharge for second homes, buy-to-let investments, and limited companies buying residential properties will rise by an additional 2%, reaching a 5% surcharge on transactions after October 31, 2024.
Inheritance Tax (IHT) Adjustments
The 2024 Budget makes several updates to the Inheritance Tax (IHT), focusing on thresholds and relief reforms:
- The IHT threshold will stay at £325,000 until 2030, providing some continuity for estate planning.
- Starting April 2027, unspent pension pots will become subject to IHT.
Agricultural and Business Property Relief (APR/BPR) will see changes from April 2026:
- A 100% relief will apply to the first £1 million of combined assets, particularly benefiting family farms and small businesses.
- Above this amount, the relief will drop to 50%.
- For shares not listed on main exchanges (e.g., AIM), the relief rate will reduce to 50%, impacting some estates.
Minimum Wage Increases
In April 2025, the National Living Wage will rise by 6.7%, moving to £12.21 per hour for workers aged 21 and over.
Wages for younger workers will also see increases as part of a shift towards a unified adult rate.
New VAT on Private Education
From January 2025, private school fees will be subject to VAT, a move expected to impact education costs for families choosing private institutions.
Non-Domicile Tax Revisions
In a major reversal of policy, the Non-Domicile Tax Status will be gradually stopped until it is abolished in April 2025. Even the system of non-domicile status whereby individuals were taxed solely on UK income will be replaced by a residence-based model. This impacts those who have previously benefitted from a tax-avoiding status based purely on their domicile location.
Environmental and Sin Taxes
A focus on environmental and “sin” taxes is evident in the 2024 Budget:
- Fuel Duty remains frozen for another year, while Vehicle Excise Duty will double in the first year for low-efficiency petrol vehicles.
- Tobacco taxes will rise by 2% above inflation.
- A new £2.20 per 10ml tax on vaping products will be introduced in October 2026.
- Air Passenger Duty on private jets will increase by 50%, reaching £450 per passenger.
Business and Investment Incentives
The budget further offers select sector-specific and investment type-specific incentives:
- Business Rates Relief of 40% for the retail, hospitality, and leisure sectors will be continued until the end of the 2025-26 financial year, with a £110,000 limit.
- April 2025: From 28% to 32% Carried Interest Tax
- Corporate Tax remains unchanged at 25% with a roadmap for future adjustments.
These updates from the 2024 Budget reflect a broad strategy to support economic stability. It addresses inequalities and incentivizes environmentally conscious and socially responsible behavior. New income thresholds, tax incentives, and levies create a new framework. One that is fairer and more sustainable for individuals, families, and businesses.
