Overview of UK Autumn Budget 2024

The UK’s Autumn Budget 2024 introduced by Chancellor Rachel Reeves, outlines a roadmap for changes to corporate taxes, adjustments in personal taxation, and new incentives to boost green investment. Below is a summary of the main policies, changes, and incentives.

Table of Content

• Business Taxation Reforms
• Changes to Personal Tax and Wages
• Additional Changes in Indirect Taxes and Levies
• Conclusion

Business Taxation Reforms

1. Corporate Tax Strategy

• Corporation Tax: The corporate tax rate remains capped at 25% throughout Parliament. The Small Profits Rate is maintained with marginal relief to support small businesses.
• Capital Allowances: Full expensing is made permanent alongside the £1 million Annual Investment Allowance. A consultation will address the simplification of the Capital Allowances Act and explore extending tax relief to pre-development costs.
• R&D and Patent Box: The current R&D tax reliefs are retained, with an advisory panel to support SMEs. The Patent Box remains unchanged, supporting the UK’s intellectual property growth.

2. Transfer Pricing and International Compliance

• Revisions to transfer pricing rules and Diverted Profits Tax are planned, focusing on transparency for mid-sized businesses and cross-border tax simplification in line with OECD Pillar 1 and Pillar 2 guidelines.
• A new Undertaxed Profits Rule will apply from December 2024, requiring additional reporting for multinational firms operating in the UK.

Business Rates and Support

Business Rates Adjustments

• Rates Freeze: The Small Business Multiplier will stay at 49.9p, while the standard rate will rise with inflation to 55.5p.
• Retail, Hospitality, and Leisure Relief: Relief is cut from 75% to 40% for these sectors in 2025-26, and from 2026, the government will establish lower multipliers for smaller RHL properties and raise them for higher-value properties.

Small Business Support

• The government plans consultations to review the effectiveness of Land Remediation Relief and major project tax certainty for investors.

Environmental and Green Investment Incentives

Key Green Incentives

• First-Year Allowances: Extended to March 2026 for zero-emission vehicles and EV charge points, allowing businesses to claim 100% deductions for green investments.
• Film Tax Credit: Enhanced to 53% for qualifying UK films under £15 million, aimed at boosting domestic media production.

Additional Adjustments in Energy and Climate Policy

• Energy Profits Levy: Increased to 38% from November 2024, with a reduced decarbonisation allowance.
• Climate and Plastic Taxes: Increased Plastic Packaging Tax for 2025-26 and Air Passenger Duty (APD) adjustments targeting premium and private jets.

Changes to Personal Tax and Wages

National Living Wage

• Increased to £12.21 per hour for those aged 21 and over, effective April 2025. The minimum wage for those aged 18-20 will be £10.00 per hour.

National Insurance Contributions (NICs)

• Employer NICs will rise to 15%, and the threshold for employer contributions is reduced to £5,000 (previously £9,100). Employment Allowance is increased to £10,500, expanding eligibility.

Payrolling Benefits in Kind

• Employers must report benefits in kind in real time from April 2026, covering benefits like accommodation and loans.

Summary Table of NIC Changes

Capital Gains and Income Tax Reforms

Capital Gains Tax (CGT)

• Main CGT rates rise to 18% for basic rate and 24% for higher rate taxpayers. Rates for Business Asset Disposal and Investors’ Relief remain at 10% for now, increasing to 14% in April 2025.

Inheritance Tax Adjustments

• IHT relief is capped at 100% for the first £1 million of agricultural or business assets, with a 50% relief on additional amounts. Relief on non-listed shares is halved to 50% from April 2026.

Additional Changes in Indirect Taxes and Levies

Indirect Tax Adjustments

• Private Education: 20% VAT introduced on private school fees starting January 2025.
• Fuel Duty and Tobacco: Fuel duty remains frozen, but tobacco duty escalates by RPI+2%.
• Alcohol and Vaping: Alcohol duty on draught products cut by 1.7%, while a new vaping duty will apply from October 2026 at £2.20 per 10ml.

Environmental Levies

• The Climate Change Levy and Carbon Price Support see adjustments in line with inflation, with a new Carbon Border Adjustment Mechanism introduced in 2027.

Conclusion

The Autumn Budget 2024 balances tax revenue with incentives for green growth and corporate investment. Businesses benefit from predictable rates and allowances, while individuals face higher NICs, CGT, and inheritance tax limits. These changes reflect Labour’s commitment to fiscal responsibility, green energy, and equitable taxation.

Image Credit: Jordan Pettitt