The Chancellor, Rachel Reeves, has delivered the 2024 Autumn Budget and is set to raise taxes by £40 billion. We summarise the key changes and when these are anticipated to come into force.
Stamp Duty Land Tax (SDLT)
- From 31 October 2024, there will be an increase in the SDLT rates for additional dwellings from 3% to 5%. These rates will apply to purchases of second homes and buy-to-let residential properties.
- The rate for corporate bodies and non-natural persons purchasing dwellings costing more than £500,000 will increase from 15% to 17%.
Value Added Tax (VAT)
- There will be no increase to the VAT rates which remain at 20%.
- From 1 January 2025, VAT will be applied to private education and boarding services. Additionally, from 6 April 2025 the charitable rate relief from business rates charged to private schools in England will be removed.
Income tax
- There will be no changes to income tax or individual’s national insurance contributions (NICs).
- From 6 April 2026, carried interest will be taxed in line with income tax.
- From the 6 April 2025, Employer’s NICs rate will rise from 13.8% to 15% as well as the threshold at which NICs will become payable falling to £5,000.
Inheritance Tax (IHT)
- The inheritance tax thresholds of £325,000 (the nil-rate band) and £175,000 (the residence nil-rate band) will be fixed at the current rates for a further two years until April 2030.
- From 6 April 2027, inherited pension pots will be subject to inheritance tax.
- With effect from 6 April 2025, the scope of agricultural property relief (APR) will be extended to include land managed under an environmental agreement with, or on behalf of, the UK government, local authorities, or relevant approved bodies.
- From 6 April 2026, APR and business property relief (BPR) will be reformed. The existing 100% relief from IHT will continue to apply to the first £1 million of combined agricultural and business property. Thereafter, there will be a reduced rate applicable of 50%. A consultation is set to be published at the start of 2025 to explain how the reformed £1 million allowance will apply to qualifying assets that are held in trust.
- The rate of BPR will reduce to 50% in relation to shares designated as “not listed”, which includes AIM shares
Capital Gains Tax (CGT)
- The government has increased the lower rate of CGT from 10% to 18% and the higher rate from 20% to 24% for non-residential property disposals. This equalises the CGT rates with the current residential property CGT rates which remain unchanged. The CGT rate for trustees and Personal Representatives increases to 24%.
- Business Asset Disposal Relief (BADR) and Investors’ Relief are affected with BADR rising to 14% from 6 April 2025, and rising further to 18% from 6 April 2026. The lifetime limit on Investors’ Relief will be reduced from £10 million to £1 million on qualifying disposal made after budget day.
- From 6 April 2025, CGT charged on carried interest will increase from 28% to 32%. From 6 April 2026, a revised regime will be introduced to treat carried interest as trading profits therefore becoming subject to income tax as opposed to CGT.
Abolition of the non-domicile regime
- The Government has committed to abolishing the historic non-domicile regime.
- A new regime, known as the Foreign Income and Gains regime (the FIG) will provide 100% relief on foreign income and gains for new arrivals to the UK in their first 4 years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.
- The concept of domicile will be replaced by a ‘residence’ test, based on the UK’s Statutory Residence Test.
- An individual is long-term resident (and in scope for Inheritance Tax on their non-UK assets) when they have been resident in the UK for at least 10 out of the last 20 tax years, and non-UK assets remain in scope for between 3 and 10 years after leaving the UK.
- A Temporary Repatriation Facility (TRF) will be available for individuals who have previously claimed the remittance basis.
- The TRF will be available for a limited period of three tax years at a reduced rate of 12% for tax years 2025/26 and 2026/27 and 15% in tax year 2027/28.
- The protection from tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the FIG.
- For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase foreign assets they held on 5 April 2017 to their value at that date, when they dispose of them.
This is only a brief summary of the extensive changes that are coming into force. If you have any questions, please get in touch with the Private Wealth & Tax team at Quastels and we would be happy to assist.
