Autumn Budget round-up

Yesterday’s Budget was not as severe as the weeks of relentless speculation had suggested it might be.?Instead of a raging bull in a China shop it was more like a dachshund, and the damage wasn’t as bad as feared.

But there was damage.

The hike in employers’ national insurance contributions (NICs) will significantly increase the costs of employing people. The increase in employment allowance from ￡5,000 to ￡10,500 will protect smaller employers, but dropping the secondary NIC threshold to ￡5,000 and upping the rate to 15% will really hit medium-sized and larger employers.??

Capital gains

Capital gains tax (CGT) will be increased, as was expected, from 10% to 18% at the lower rate and from 20% to 24% at the higher rate. While this was not as bad as the 39% some experts in the media were predicting, the change is immediate, which can result in complexities when looking at tax positions for 2024/25, with gains at different rates.

Business asset disposal relief will remain at 10% this year, before rising to 14% in April 2025, and to 18% from 2026/27, in line with the lower rate of CGT for the first ￡1m. This follows significant speculation it would be removed altogether.

Pensions & IHT

Many had also hypothesised that the tax-free lump sum one can withdraw from their pension would be reduced to just ￡100,000 in this Budget, but the rules remain unchanged—as do the rules regarding income tax relief on pensions, which had been predicted to move onto a flat rate of 30%, and the threshold for inheritance tax (IHT), which will stay frozen at ￡325,000 until 2030.

From 2027, however, inherited pension pots will be subject to IHT, which will be significant for those who have been holding off drawing their pension fund.

The Alternative Investment Market (AIM) had expected to lose its 100% relief from inheritance tax on shares held for at least two years and shrank to its smallest size since 2001 in the lead up to this Budget. Instead, AIM-listed stocks will retain a 50% relief, setting the effective IHT rate at 20%—news which spurred a 4.3% jump on the FTSE AIM 100 index, setting it up for its biggest one-day rise since April 2020.

Fuel duty

It was pleasing to see no fuel duty rises, with the freeze extended for another year and the last government’s 5p cut maintained. As well as any increase in fuel duty being perceived as a tax rise for working people, there would have been concern that fuel duty rises would create inflation, as all the goods we have delivered rely largely upon fuel—and so the logistics sector would have passed on these costs to the end customer.

Business rates

Other key changes—non-dom reforms, VAT on private school fees—came as no surprise, but one area where the potential implications are concerning is business rates relief for those in the retail, hospitality and leisure sector. Whilst some element of this will continue, it appears the rate of relief is reduced from 75% to 40% and will only apply up to a cap of ￡110,000, which could still significantly increase costs for those with commercial property.