On Wednesday, 30th October, Chancellor Rachel Reeves presented the highly anticipated Autumn Budget, unveiling a series of significant changes that are set to impact individuals and businesses across the North East of Scotland. While some adjustments were widely expected, others took many by surprise, prompting critical discussions about their implications for sectors.
1. Employer National Insurance Increase
One of the biggest changes is the rise in Employer National Insurance (NI) contributions, set to increase from 13.8% to 15% starting in April 2025. Aiming to increase government revenue, this update will affect many businesses as they navigate increased payroll costs.
2. Capital Gains Tax Adjustments
The lower rate of CGT will increase from 10% to 18%, while the higher rate will jump from 20% to 24%, effective immediately. An increase in the rate paid by entrepreneurs will be phased in, with an effective tax rate of 10% for the lifetime limit of qualifying gains of £1 million being retained at present, but the rate increases to 14% in April 2025 and to 18% in April 2026.
3. Inheritance Tax Threshold Freeze Extended
The Inheritance Tax (IHT) threshold freeze will now extend to 2030, maintaining the current threshold of £325,000 for tax-free inheritance. Furthermore, new rules will bring inherited pensions under the IHT umbrella with effect from April 2027, alongside reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR). From April 2026, the first £1 million of combined business and agricultural assets will remain exempt from IHT, but any value exceeding this will be subject to tax at an effective rate of 20% after a 50% relief.
4. Corporate Tax Changes
In corporate taxation, Reeves announced that the Corporate Tax Rate will be capped at 25% for the entire parliamentary term. The government will also maintain Research and Development (R&D) rates, the existing full expensing relief and also the £1 million Annual Investment Allowance.
5. Energy Profits Levy Increase
As previously announced, the Energy Profits Levy is set to rise to 38%, effective 1st November 2024, and will now expire in March 2030, one year later than current legislation. The government also confirmed that the 29% investment allowance will be removed but assured that 100% first-year allowances and decarbonisation allowances would remain in place. This adjustment reflects the government's commitment to providing energy security while addressing what has been characterised as the windfall profits of energy companies.
6. Private School VAT Introduction
Aiming to redistribute educational funding and provide more resources for state schools, Reeves announced the introduction of VAT on private school fees, set to take effect from January 2025. Additionally, business rates relief for private schools will be eliminated starting April 2025.
7. National Minimum Wage Increase
The announcement included a rise in the National Living Wage by 6.7%, from £11.44 to £12.21 per hour affecting staffing costs and operational budgets.
Conclusion
The increase in National Insurance contributions, along with changes to Capital Gains and Inheritance Taxes will require careful financial planning for both individuals and businesses. At Hall Morrice, our team is here to address any questions you may have in relation to the latest Autumn Budget. Please get in contact with your usual Hall Morrice contact or our Tax Partner, Chris Colville for expert guidance.
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