Autumn Budget 2024: Key Takeaways
Autumn Budget 2024: Key Takeaways for Small Business Clients
The Chancellor, Rachel Reeves, unveiled the first Labour budget since 2010, promising to ‘invest, invest, invest’ in the UK’s economy. While this budget contains significant announcements for small business owners, several important details were not addressed in her televised speech that will also impact accountants and bookkeepers. Here’s a comprehensive breakdown of the key points from the Autumn Budget 2024.
Major Changes to Employer National Insurance
One of the most noteworthy announcements is the overhaul of the Employer National Insurance (NI) contributions, which will take effect from April 2025. Here are the crucial changes:
Increased Rate
The rate for Employer NI will rise from 13.8% to 15%, increasing the cost for businesses.
Lower Earnings Threshold
The threshold for Employer NI, currently at £9,100, will be reduced to £5,000. This means that businesses will begin paying NI contributions at a lower income level, leading to higher costs for employers.
Employment Allowance Increase
The Employment Allowance, which currently provides a reduction of £5,000 in NI contributions for certain small employers, will be increased to £10,500. Furthermore, the eligibility threshold of £100,000 for employers will be eliminated. However, limited companies with only one employee who is also a director will still be ineligible for this allowance.
The Employment Allowance will now be an important relief to claim, and we will be issuing further guidance on who is eligible very soon.
Renewed Commitment to Making Tax Digital for Income Tax
The government has reaffirmed its commitment to the rollout of Making Tax Digital for Income Tax (MTD IT). This initiative requires businesses and landlords with qualifying income to maintain digital records and submit updates to HMRC quarterly via compatible software. Key points include:
- MTD IT will apply to self-employed individuals and landlords with qualifying income exceeding £50,000 starting April 2026.
- For those with qualifying income over £30,000, the requirement kicks in April 2027.
- Individuals with incomes over £20,000 will be included by the end of this parliamentary session (by 2029 at the latest).
Increased Interest Rates for Late Tax Payments
To encourage timely tax payments, the government has announced an increase in the late payment interest rate. Currently set at the Bank of England base rate plus 2.5%, bringing the total to 7.5%, this will rise to the base rate plus 4% from 6th April 2025. This change aims to close the tax gap and enforce stricter compliance with tax regulations.
Immediate Increases to Capital Gains Tax and Changes to Reliefs
From 30th October 2024, significant changes to CGT were introduced:
- For lower rate taxpayers, CGT will increase from 10% to 18%, and for higher rate taxpayers, it will rise from 20% to 24%.
- This adjustment aligns CGT rates on all assets with the current rates applicable to residential property, which will remain unchanged.
- Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will see a phased rate increase: from 10% to 14% for disposals after 6th April 2025 and from 14% to 18% for disposals after 6th April 2026.
Additionally, the government plans to increase the CGT rate on carried interest (compensation for fund managers) to 32% from April 2025, with further reforms expected in April 2026.
Introduction of Advanced Electronic Signatures
Starting 6th April 2025, tax advisers will be required to provide an Advanced Electronic Signature for certain income tax repayment claims. Specific claims affected by this requirement have not yet been clarified.
Changes to Tax Rules on Liquidations of LLPs
From 30th October 2024, the government will modify how capital gains are taxed when a Limited Liability Partnership (LLP) is liquidated, and assets are disposed of to a contributing member or a connected person. The specifics of these changes are yet to be disclosed.
Close Company Loans to Shareholders
The government intends to eliminate “opportunities to side-step the anti-avoidance rules” for shareholders taking loans from close companies. Details on how this will be implemented have not yet been provided.
Extension of 100% First Year Allowances for Zero-Emission Cars
The 100% First Year Allowances (FYA) for qualifying expenditure on zero-emission cars will be extended for an additional year, continuing until 31st March 2026 for limited companies and 5th April 2026 for sole traders and partnerships.
Double-Cab Pick-Ups Classified as Cars
Effective from 1st April 2025 for Corporation Tax and 6th April 2025 for income tax, double-cab pick-up vehicles (DCPUs) will be classified as cars for tax purposes. This reclassification will affect capital allowances, benefits in kind, and certain deductions from business profits. However, for VAT purposes, these vehicles may still be classified as vans, allowing VAT recovery on purchases.
High Income Child Benefit Charge (HICBC)
The government has decided not to proceed with reforms to base the High Income Child Benefit Charge on household incomes. Starting in 2025, employed individuals will be able to pay their HICBC through their tax codes, potentially removing the need for many to file a tax return. For those who do not pay through their tax codes, HMRC will pre-populate self-assessment tax returns with HICBC data to mitigate the risk of taxpayers overlooking this obligation.
Conclusion
The Autumn Budget 2024 introduces critical changes for small businesses, making it essential for business owners to stay informed. At Competex, we’re here to help you navigate these new policies with clarity and confidence.
For further insights, you can read the full report on the government’s website. If you’re looking for expert guidance on how these updates impact your business, reach out to us at Competex to see how we can support your success under the latest regulations.
For further information, please contact us at info@competex.co.uk or visit our website at https://www.competex.co.uk.