The Labour Government have announced their autumn budget, with many changes being introduced across the coming years. From an increase in inheritance tax, to the appointment of a Covid Corruption Commissioner to recoup wasted public funds, below are some of the significant takeaways from the autumn 2024 budget announcement.
Capital Gains Tax
Chancellor Rachel Reeves announced the government’s decision to increase Capital Gains Tax (CGT) rates as part of the 2024 budget. Capital Gains Tax is a tax on profit made from selling an asset, such as property or investments.
Currently, basic rate taxpayers pay 10% CGT, or 18% on residential property, where high earners pay 20% and 24% respectively. The changes to CGT will increase the lower rate from 10% to 18%, and the higher rate from 20% to 24%. Main residential properties will still be exempt from this tax due to Private Residence Relief.
Entrepreneur Relief
Business Asset Disposal Relief (also known as Entrepreneurs’ Relief) can reduce Capital Gains Tax when selling all or part of your business.
This relief will remain at 10% this year, before rising to 14% in April 2024, and increasing again to 18% in 2026/27.
Stamp Duty Land Tax
The Stamp Duty Land Tax surcharge on second homes will be increased to 5%, raised from 2%. This will apply to current homeowners buying an additional residential property worth £40,000 or more.
John E. Jones, Director & Head of Residential Property at Jackson Lees, expressed disappointment with the Chancellor’s failure to reference SDLT first-time buyer relief in the Budget:
“Rachel Reeves increases SDLT surcharge on second-home buyers to five per cent, starting tomorrow, but fails to mention or deal with extending the current first-time buyer SDLT relief which will revert to a lower threshold from April 2025, at which point duty is payable. This is a mistake. The budget is a missed opportunity to help those struggling to get onto the property ladder.
“I would, at the very least, have liked to have seen some recognition by the Chancellor of the importance that home ownership has on the well-being and life-chances of most people in this country. Reverting, in April 2025, to the pre-September 2022 threshold is simply going to make it more difficult for people to buy, add expense to the buying process, and for those of us in the older generation it will result in the need to downsize becoming more expensive to do so. It is no surprise that there are calls for SDLT to be scrapped altogether.
“For conveyancers, the pressure from first-time buyers and others to complete transactions before the threshold reverts to the lower level in April 2025 will replay the nightmare that was the Covid SDLT holiday.”
Inheritance Tax
Inheritance tax is a levy applied to the estate of someone that has died. Currently, only about 4% of families end up paying, as most estates fall below the tax threshold.
Each individual has a £325,000 inheritance tax-free allowance. Estates valued below this threshold don’t incur tax, whilst those above it are taxed at 40% on the excess.
These thresholds are being extended until 2030, and it is unclear what changes will be made to inheritance tax after then. The Chancellor also announced that inherited pensions will be included in inheritance tax from April 2027.
Chris Stone, Deputy Head of Wills, Trusts & Probate at Jackson Lees, said:
“The budget announcement by the Chancellor in relation to inheritance tax can probably best be described as unsatisfactory but not as unsatisfactory as it could have been. In the lead up to the budget, it had been thought that the Chancellor may announce an increase in the inheritance tax rate or an extension in the seven-year rule for lifetime gifts to 10 years.
“It is disappointing that the nil rate band remains frozen until 2030 (it has remained at £325,000 since 2009) as the impact of inflation over that time has meant and will mean that more estates will be caught by the inheritance tax trap. A tax that was originally meant for the wealthy is now a tax for many more to be wary of.
“In addition to the freezing of the nil rate band, the decision to bring into account inherited pensions for inheritance tax means that many people that have been planning to leave their pensions to family members, on the understanding that those pensions will fall outside of their estate for inheritance tax purposes, will now have to think again. It is welcomed that this will not come into force until 2027, but many people will need to reconsider their financial planning arrangements in lifetime and on death.
“The introduction of an inheritance tax charge on people that have business interests if their business assets exceed £1m could be disastrous for the continuity of their business and the communities that they support following their death.
“Similarly, the introduction of an inheritance tax charge on AIM investments will mean that people that had relied upon the business relief exemption may now consider whether to withdraw from those investments given that they are typically considered as a riskier investment. We manage many trusts where those who are vulnerable have received personal injury awards.
“The increase in the capital gains tax rates further penalises those vulnerable people following the reduction of the capital gains tax allowances over the last few years made by the previous government.”
Business Relief and Agricultural Property Relief on Inheritance Tax
The government is also reforming agricultural property relief and business relief from April 2026. Whilst the first £1million of combined agricultural and business assets will attract no inheritance tax, any assets over £1million will be required to pay inheritance tax at an effective rate of 20%.
National Insurance Increase for Employers
From April 2025, the amount businesses will pay on their employees’ national insurance contributions will increase from 13.8% to 15% on a worker’s earnings above £175. The government has also lowered the threshold at which employers start paying tax on an employee’s salary, reduced from £9,100 a year to £5,000.
However, the amount employers can claim back from their National Insurance bill has been increased from £5,000 to £10,500.
Increase in Minimum Wage
Minimum wages for workers will be increasing from April 2025. National Living Wage (the minimum wage for over 21’s) will increase from £11.44 to £12.21. For 18–20-year-olds, minimum wage rise from £8.60 to £10, and apprentice wages will go up from £6.40 to £7.55.
Business Rates
Business rates are charged on most non-domestic properties, such as shops, pubs, offices and factories. In April 2025, the current 75% discount on rates is set to expire, being replaced by a discount of 40% up to £110,000.
For many businesses, this increase will see their rates nearly double.
Warm Homes Plan
The government has committed a £3.4bn kickstart to the Warm Homes Plan. From installing new insulation and installing solar and heat pumps, the initiative hopes to transform five million homes across the country over the next 5 years, making them cheaper to run and reducing their environmental impact.
Following the Grenfell Inquiry, £1bn of investment will also be going into removing dangerous cladding from residential buildings.
Andrew Leakey, Head of Civil & Commercial Litigation at Jackson Lees, said:
“The budget addressed the Warm Homes Plan, which aims to attract £3.4bn to upgrade homes and buildings across the country. While the initiative is commendable, we must learn from past experiences where some upgrades have had devastating effects on consumers, such as cavity wall insulation that went badly wrong. It is crucial that we take proactive measures to prevent such issues from occurring again.
“The government needs to ensure that there is adequate redress for consumers in cases where these plans do not deliver as expected. This will help build trust and confidence in the Warm Homes Plan, and ultimately, contribute to its success.”
Appointment of Covid Corruption Commissioner
Labour have recruited a Covid Corruption Commissioner, with the aim of recouping fraudulently obtained finances under the Conservative government.
The aim of the Commissioner is to recover public funds that were lost to flawed contracts and fraud during the Covid-19 pandemic, from business grants, incorrectly claimed furlough or abuse of schemes like ‘eat out to help out’, to money that was wasted on ineffective personal protective equipment (PPE) and other contracts that failed to deliver necessary services to the NHS.
Chancellor Rachel Reeves believes that the Treasury can recoup £2.6bn from waste, fraud and flawed contracts.
Nicola Brook, solicitor at Broudie Jackson Canter, which represents more than 7,000 families from the Covid-19 Bereaved Families for Justice UK Group, said:
“Too much money was gratuitously wasted during the pandemic through negligence and fraud and the Labour government should be commended for the creation of the role of a Covid Counter Fraud Commissioner to address this horrendous issue. If it is successful and the many millions wasted can are recouped, then the money should be ploughed back into the NHS - where the funds should have been sent in the first place.”
If you fear you have been impacted by the most recent budget announcements, please do not hesitate to reach out to a member of our team for advice. Whether your concerns are around estate planning or future-proofing your business, we can help you.
Call us on 0151 282 1700 or make an enquiry to get in touch.