Rachel Reeves has finally given her maiden budget speech after much speculation and debate over what constitutes a ‘working person’ and whether increasing employer NI contributions would be a breach of the Labour manifesto. So, what changes have been announced and how may they affect you and your business?

National Insurance

National Insurance Contributions (NIC) for employers will increase to 15% from April 2025 (from 13.8%) and the level at which employers start paying NI will fall to £5,000 from the current £9,100. This change is accompanied by an increase in the Employment Allowance from £5,000 to £10,500, helping to protect smaller employers from the increase. The £100,000 employer’s NIC threshold for eligibility will also be removed from 6 April 2025, increasing its availability to a larger number of employers.

These changes may impact any individuals or businesses who employ people and may bring into scope many employers who have not previously been concerned with NIC. It will be important for clients to review their position in any event.

OCG Accountants offer payroll services saving you time and helping you and your business to navigate the new rules and to meet your tax obligations.

Capital Gains Tax

The current Capital Gains Tax rates on residential property of 18% or 24% will stay the same, however, the rates on other assets will increase from 10% or 20% to 18% or 24% with effect from 30 October 2024 matching the residential property rates. On the plus side, the rates for residential property remain the same but on the flip side the rates applicable to other assets (not held in an ISA) have been increased to match. The new rates apply with immediate effect, so there is no scope for disposing of assets before the new rates come into force. The lifetime amount of gains eligible for business asset disposal relief remains at £1m, although CGT payable on such gains will increase from the current 10 per cent to 14 per cent in April 2025 and 18 per cent in April 2026.

One of the potential changes mooted before the budget of scrapping CGT rebasing on death has not materialised and that, coupled with the new higher rates, would seem to act as a disincentive for making gifts of assets during lifetime.

OCG Legal’s Private Client team can help you with your estate planning strategy making use of the exemptions and reliefs that are still available.

Inheritance Tax

The Nil Rate Band of £325,000 (which was introduced with effect from 6 April 2009!) is still unchanged and is now fixed until 2030 despite inflation and huge increases in property prices over the period. From April 2026, business property relief and agricultural property relief will be restricted to a combined £1m with anything over that being subject to IHT @ 20%. Shares listed on AIM (which are currently exempt from IHT) will also being subject to IHT @20% from that date.

The final big change with IHT is that from April 2027, inherited pensions will be subject to IHT @ 40% as well. Under the current rules, if you die before age 75, your pension can generally be inherited tax-free but if you die aged 75 or over, your heirs will generally pay income tax on what they inherit at their personal tax rate (20%, 40% or 45%). However, under the new rules, if you die under age 75, your heirs will pay no income tax on any inherited pension after IHT has been deducted but if you die aged 75 or over, your heirs will pay income tax on any inherited pension at their personal tax rate (20%, 40% or 45%) after IHT has been deducted. This could result in an effective tax rate of up to 67%! These pension changes will also take many more estates over the £2m threshold at which point the residence nil-rate band tapers away.

The Potentially Exempt Transfer (PET) rule (often referred to as the 7-year rule) and the regular gifts out of excess income rules remain unchanged.

OCG Legal’s Private Client team can help you with your estate planning strategy making use of the exemptions and reliefs that are still available.

Stamp Duty

The stamp duty surcharge for second homes will increase to 5% from the current 3%. This will make it significantly more expensive for property investors to acquire further properties (though the cost of selling is unchanged with CGT rates on residential property remaining the same). Again, the new rates apply with immediate effect, so there is no scope for making purchases before they come into force.

The Annual Tax on Enveloped Dwellings (ATED) charges which apply to companies that own UK residential property valued at more than £500,000 (and which is not let on a commercial basis) will rise by 1.7 per cent from 1 April 2025 (broadly in line with the Consumer Price Index).

OCG Legal’s Conveyancing team can help you with your property purchases, sales and remortgages and OCG Mortgages can help you with mortgages and bridge financing.

Minimum Wage

The minimum wage for people 21 and over will increase to £12.21 per hour (a rise of 6.7%), for people aged 18-20 will increase to £10.00 per hour (a rise of 16.3%) and for people aged 16-17 will increase to £7.55 per hour.

OCG Legal & One Consultancy Solutions

OCG Legal work with One Consultancy Solutions to offer a comprehensive multi-disciplinary advisory and consultancy service providing business advisory services as well as bringing together legal, tax and accountancy advice from across the One Consultancy Group to provide holistic advice to you and your business. OCG Legal also have an introducer arrangement with a prominent Financial Planning team that can be engaged via the OCG Legal Private Client team.

Please get in touch with your usual OCG contact or e-mail contact@oneconsultancysolutions.co.uk for more information.

30 October 2024