Walker Accountancy

The Chancellor, Rachel Reeves, presented her Budget statement (and also reminded us that she is the first woman ever to do so) on 30 October 2024.

The main announcements relating to individuals and small businesses were:

• Personal tax and National insurance:
  • As expected, all main income tax and national insurance threshold will remain frozen until the end of the 2026-7 tax year (some allowances, such as the blind person’s allowance, continue to be uprated in line with inflation).
  • An unexpected future bonus though: thresholds will start to increase by inflation again with effect from 6 April 2028.
• Employer national insurance
  • Employer national insurance will increase to 15% (from 13.8%) with effect from 6 April 2025.
  • The employer NI threshold (secondary threshold) will decrease from £9,100 to £5,000 (announced in the budget, but the accompanying paperwork says £96 per week, which would be £4,992 – note that that is less than the lower earnings threshold, at which the employee is credited for their state pension, so those earning £9,100 currently won’t be able to simply reduce their pay to £5,000 if they need extra years for their state pension).
  • To compensate small employers, the employment allowance (the amount employers can deduct from their payments of employer NI each year) will increase from £5,000 to £10,500.
  • The £100,000 threshold for eligibility for employment allowance will be removed from 6 April 2025, meaning that most employers (a notable exception being those whose only employee earning over the secondary threshold is a director) will once again be eligible for the relief.
• Corporation tax
  • The government published its ‘Corporate Tax Roadmap’, which confirms that the headline rate of corporation tax will be capped at 25% for this Parliament and the small profits rate of 19% and marginal relief will remain at their current rates and thresholds
• Minimum Wage
  • The national living wage (‘NLW’ for 21+ year olds) will increase to £12.21 (by 6.7%) with effect from April 2025.
  • The national minimum wage for 18-20 year olds will increase to £10.00 (16.3%) in a move aimed at narrowing the gap between that and the NLW with a view to eventually creating a single adult rate.
  • The apprentice rate (and presumably the under 18 rate) will increase from £6.40 to £7.55 per hour.
• Capital gains tax
  • The rates for capital gains tax for assets other than residential properties increase to 18% basic rate (from 10%) and 24% higher rate (from 18%) with effect from today (30 October 2024).
  • The capital gains tax rates for gains covered by business asset disposal relief (the first £1m of qualifying business asset gains) will increase from 10% to 14% from April 2025 and then to 18% from 6 April 2026.
  • The annual allowance remains at £3,000.
• Inheritance tax
  • IHT rates and thresholds remain unchanged and the thresholds will now be frozen until 2030.
  • Pension fund balances will cease to be exempt from IHT with effect from 6 April 2027.
  • Agricultural and Business property reliefs will be reformed from 6 April 2026. The first £1m will be exempt from IHT and the remainder will be eligible for 50% relief (so effectively taxed at 20% as things stand currently).
  • Similarly, there will no longer be 100% relief for AIM listed shares, they will qualify for 50% relief.
• Landlords and property:
  • The additional Stamp Duty Land Tax charge for the purchase of second and subsequent residential properties will increase from 3% to 5% with effect from tomorrow (31 October 2024).
• ‘Non-Doms’
  • The concept of domicile will cease to exist and tax will be paid based on a new residence based system.
• Savings
  • ISA thresholds remain unchanged
• VAT
  • The VAT registration thresholds remain unchanged
• Other indirect taxes
  • Fuel duties will be frozen for another year
  • Alcohol duties will increase in line with RPI with effect from 1 February 2025, apart from draught products below 8.5% ABV, which will decrease by 1p.
• Other announcements
  • The interest rates on overdue tax (currently set at base plus 2.5%) will increase by 1.5 percentage points from April 2025 (so, to base plus 4%).
  • The official rate of interest (at which the benefit in kind is calculated on loans from a limited company) will now increase quarterly rather than annually. The headline says “Setting the official rate of interest for quarter 3 of tax year 2024 to 2025” and implies that it will change this year, but then goes on to say that in year increases may take place from April 2025, so it is a bit ambiguous as to whether there will be an immediate increase.
  • Hiddden in the small print of the accompanying documents was a note regarding a potential extenstion of making tax digital for income tax (MTD). MTD will require quarterly tax reporting for sole traders and landlords with a turover of £50,000 (from 6 April 2026) and then £30,000 (from 6 April 2027). The Budget documents set out the intention to extend this to sole traders and landlords with turnover of over £20,000 by the end of this Parliament.

Confirmation of the personal tax rates and allowances for 2025-26 can be found here: Annex A