Key takeaways
- Capital gains tax on non-residential assets rose from 10%/20% to 18%/24% from 30 October 2024, while residential property CGT rates stayed at 18% and 24% with no change to the annual exempt amount.
- Employer National Insurance increased from 13.8% to 15% from April 2025, and the secondary threshold dropped from £9,100 to £5,000, raising employment costs for businesses across the UK.
- Business Asset Disposal Relief was not abolished but its rate will rise from 10% to 14% in April 2025, then to 18% in April 2026, reducing the tax advantage for owners selling qualifying businesses.
- Income tax, employee NIC and dividend tax rates all remained unchanged, though frozen thresholds continue to drag more earners into higher bands as wages rise over time.
- Pension tax relief was left untouched with no flat rate introduced. Inheritance tax thresholds were frozen until 2030 and pensions will be brought into IHT from April 2027.
The upcoming Autumn Budget 2024 is shaping up to be one of the most anticipated—and possibly most challenging—budgets in recent history. Chancellor Rachel Reeves will deliver the Labour government’s first budget on 30th October, and all eyes are on the potential changes that could reshape the UK’s tax system.
Prime Minister Sir Keir Starmer has already warned that the Budget could be "painful" for many. After finding £22 billion of overspending left by the previous government, he has hinted at tough decisions ahead. He has emphasised that the previous government left the economy in poor condition, and drastic measures are needed to get back on a sustainable track.
While the Labour government promised not to raise income tax, national insurance, corporation tax, or VAT, there are concerns about where the extra revenue will come from.
As the country prepares for these financial changes, many wonder how these policies will impact everyday life and whether they will be enough to address the UK's economic challenges.
This article will explore what to expect from the upcoming Autumn Budget 2024, focusing on potential tax changes that could affect take-home pay for self-employed individuals and limited company directors.
Let’s explore Autumn Budget 2024 Predictions to stay informed on possible tax changes.
Autumn Budget 2024: What Do We Already Know?
The Autumn Budget 2024 has already provided some key insights into what taxpayers can expect:
Winter fuel payments: Only pensioners who receive pension credit or other means-tested benefits will be eligible for winter fuel payments. This change limits eligibility compared to previous years. The government has confirmed this restriction for upcoming payments.
Windfall tax on oil and gas companies: Starting November 1, 2024, the windfall tax on oil and gas companies will increase from 35% to 38%, aiming to capture more revenue from their profits.
Tax regime for non-domiciled individuals: The government is moving ahead with plans to overhaul the tax rules for non-domiciled individuals (non-doms). From April 2025, a new tax system based on residency will replace the current rules for non-doms, continuing a policy announced in the Spring budget.
VAT on private school fees: From 1 January 2025, VAT will be applied to private school fees for education and vocational training. Boarding services offered by private schools will also be taxed at the standard 20% VAT rate. The new rules also prevent schools from avoiding this change by taking advance payments.
State pension: The state pension will continue to rise each year according to the triple lock, which ensures it increases by the highest of 2.5%, inflation, or average earnings. In April 2025, a 4% rise is expected.
Taxation of private equity carried interest: The government wants to change how it taxes the profits that private equity fund managers earn. These profits, known as carried interest, are taxed at 28% as capital gains. Discussions are underway about taxing them at regular income tax rates instead, which could increase the tax burden for fund managers.
Autumn Budget 2024 Predictions
Personal Taxes and Autumn Budget 2024:
1. Personal Allowance:
The personal allowance is unlikely to change in the near future. This is the income you can earn each year before paying any income tax. Currently, it stands at £12,570, and there are no indications that the government will increase or reduce this threshold soon. While other tax changes may be on the horizon, the personal allowance will likely remain steady for now, helping individuals keep more of their earnings tax-free.
2. Income Tax Rates:
You won’t see income tax, national insurance, or VAT rate increases. As a result, more individuals will progressively be in higher tax brackets as their earnings increase. This phenomenon, often called "fiscal drag," occurs when inflation and wage growth push people into paying higher tax rates without changing the tax bands themselves. It represents a stealthy increase in the tax burden for many households.
3. National Insurance:
Employee National Insurance rates are unlikely to change soon. This is the tax taken from your salary to help fund public services like the NHS and state pensions. Most employees pay 8% on earnings between £12,570 and £50,270. Above that, it is an additional 2%. While other taxes might see changes, the government has given no sign that it will adjust National Insurance rates for employees anytime soon. So, your contributions are expected to stay the same.
4. Dividend Taxes:
Dividend tax changes could be on the horizon, especially with recent cuts to the tax-free dividend allowance. In the past few years, the tax-free threshold dropped from £2,000 to £1,000 in April 2023 and to £500 in April 2024. Some predict that the government could reduce this even more, possibly to £250, or even align dividend tax rates with income tax levels.
Currently, dividend income is taxed at lower rates than regular income. Unlike salary or self-employment income, dividends do not incur a National Insurance charge. Aligning dividend tax with income tax rates of 20%, 40%, and 45% could simplify the tax system, but it would affect both investors and business owners who pay themselves through dividends.
However, with Labour aiming to encourage investment in the UK stock market, they may tread carefully. Significant changes to dividend taxes could harm both investors and business owners, contradicting the government's goal of promoting business growth.
Example: Under the current rules, a basic rate taxpayer with £25,000 in dividend income is charged at an 8.75% dividend tax rate and benefits from a £500 dividend allowance. This results in £24,500 of taxable dividend income, leading to a tax bill of £2,143.75. However, if the proposed changes take effect—raising the basic dividend tax rate to 20% and reducing the dividend allowance to £250—the same individual would face a much higher tax bill. With £24,750 in taxable dividend income, the tax payable would increase to £4,950. This significant rise in tax more than doubles the current tax burden, from £2,143.75 to £4,950, making a substantial impact on dividend earners.
5. Pension Tax Relief:
Another forecast is that the government may introduce a flat rate of pension tax relief, potentially set at 30%. Currently, higher and additional rate taxpayers benefit the most from pension tax relief, but the government might simplify the system by offering a single flat rate for everyone.
The Treasury has been considering this move for years due to the rising cost of pension tax relief, which hit £48.7 billion in 2022/23. While no official statement has been made, many believe a 30% rate would be more politically feasible than lower options.
Example: Currently, pension tax relief varies by income bracket: basic rate taxpayers receive 20%, higher rate taxpayers get 40%, and additional rate taxpayers enjoy 45%. For example, if a basic rate taxpayer contributes £100 to their pension, HMRC gross ups the contribution to £125. A higher rate taxpayer sees their £100 contribution grossed up to £167, while an additional rate taxpayer benefits from a grossed-up amount of £182. Under a proposed flat rate of 30% relief for all, a basic rate taxpayer would have their contribution grossed up to £143, which is better than the current £125. However, higher and additional rate taxpayers would see their grossed-up contributions drop to £143 from £167 and £182, respectively, reducing their overall tax relief and potentially discouraging higher earners from maximising their pension savings.
6. Capital Gains Tax Rate:
Predictions suggest that the government will likely change Capital Gains Tax (CGT) in the upcoming Autumn Budget. Although the government has confirmed that CGT won’t apply to gains from selling primary residences, the tax rate could be raised to match income tax rates. There is also speculation that Labour may reduce or abolish the annual CGT allowance.
This could generate significant revenue for the Treasury, with one Labour memo estimating that increasing CGT could bring in around £8 billion in the long term. While nothing is confirmed, these changes are expected to be a significant part of Labour’s tax reforms under Rachel Reeves.
If the CGT annual exempt allowance is abolished and all CGT rates are increased by 2%, here's what will happen:
Example: Suppose a higher rate taxpayer sells a property that is not their main home with a net gain of £150,000, and no reliefs apply. Under the increased rates, they would pay £39,000 in CGT (26% × £150,000). Under the current rules, the CGT payable would be £34,920 (24% × (£150,000 – £3,000)).
Business Taxes and Autumn Budget 2024:
1. Corporation Tax:
The government has confirmed that the Corporation Tax rate will remain capped at 25% for the rest of this parliament. The current rate is already high compared to recent years, and the government has committed to stability, with a five-year roadmap for Corporation Tax pending release. However, Labour’s Rachel Reeves has suggested that they would take action if the UK’s competitiveness is at risk, which could mean lowering the rate in the future.
2. VAT:
At the Labour Party conference in Liverpool, Rachel Reeves pledged no increases in VAT. Raising VAT is off the table due to manifesto commitments, and lowering it would be too costly for the government.
3. Business Asset Disposal Relief:
Currently, BADR allows eligible taxpayers to pay a reduced 10% Capital Gains Tax (CGT) rate when selling certain business assets. However, with the relief costing the government around £1.5 billion annually, there are concerns that it could be reduced or even abolished. Some experts also predict that BADR's £1 million lifetime limit might be lowered, impacting business owners who sell their businesses.
Budget 2024 Rumours: Quick Summary
Get Ready for the Change
The Autumn Budget 2024 is expected to bring significant tax changes, with speculation around key areas such as capital gains tax, pension tax relief, and business asset disposal relief. Business owners and individuals should stay informed, as changes could impact everything from selling assets to retirement planning.
As we await the official announcements, preparing for possible tax reforms will help ensure you're ready for any new measures introduced in this year's budget.
What are you hoping to see in the Autumn Budget, and how do you think these changes will impact your business? We’d love to hear your thoughts in the comments below!
If you have any questions or concerns about how these rumoured or confirmed measures might affect your tax situation, we recommend contacting our tax accountants for guidance. Book a free consultation today to secure your financial future!
