UK Autumn Budget 2024 | Employee incentives: possible CGT and employer national insurance changes ahead?
Published on 6th Sep 2024
Tax rises on working people ruled out, but increases and changes expected in other areas
The UK government has indicated that "difficult decisions" will be necessary to secure the public finances in the Autumn Budget on 30 October, with some of the possible changes that may be announced potentially having an impact on employee incentives.
No tax rises on working people
On her first day as chancellor, Rachel Reeves confirmed Labour's election manifesto commitment that the government "will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT". Instead, the focus has been on tax rises that are likely to be made in other areas.
In his speech on 27 August, the prime minister said that the Autumn Budget is "going to be painful", again suggesting that there will be tax rises. However, he reiterated that this would not be on taxes for working people. This leaves, in particular, the possibility of limiting higher rate pensions relief and higher taxes on wealth, including capital gains tax (CGT) or, perhaps, changes to employer's national insurance contributions.
CGT changes?
Changes to CGT are expected, with possibilities ranging from increasing the rates to making changes to reliefs such as business asset disposal relief (BADR).
For assets such as shares, the CGT rate is currently 20% and, broadly, 10% for basic rate taxpayers or where the special BADR rate is available and claimed. It is possible that CGT rates could be increased to more closely align with income tax rates (currently 20%, 40% and 45%).
There is speculation that BADR relief (and, in particular, the current £1 million lifetime limit) may also be under scrutiny.
The annual exempt amount, which is currently £3,000, has been steadily reduced in recent years. This has meant that more employee share plan participants are already required to report and pay tax on capital gains.
Employer's national insurance contributions?
While the chancellor and prime minister have repeated their manifesto pledge that Labour will not raise taxes on working people, there has been some recent press speculation about employers having to pay more national insurance contributions (NIC).
Darren Jones, the chief secretary to the Treasury, indicated on 22 August that: "We will have to consider some tax measures at the Budget on 30 October while honouring that promise to the public not to increase income tax, employee national insurance or VAT".
The reference to employee NICs leaves the door open for potential changes to employer's NICs – with possibilities including changing the rate (currently 13.8%).
Employers will need to factor in additional costs in the event that changes to employer's NICs are announced.
Consultation responses
It is to be hoped that an update on the call for evidence on proposed improvements to tax-advantaged all-employee share schemes and other outstanding consultations will be provided at or around the time of the Autumn Budget.
Tax-advantaged employee share plans offer valuable tax reliefs, and it is important that the impact of any wider tax changes on such popular and much valued plans are carefully considered.
The new Labour government's call for evidence on the tax treatment of carried interest closed on 30 August, with Osborne Clarke's response highlighting the current regime's contribution to the UK economy. A further announcement on the reform of carried interest will be made on 30 October.
Wider tax measures and possible changes to pensions tax relief
The government's other previously announced tax commitments include VAT on private school fees and changes to the tax treatment of non-domiciled people.
It may also become clear, at the Autumn Budget if not before, whether the government proposes any immediate change to pensions tax and pensions tax relief. There is increasing press speculation about possible changes in this area as the Budget approaches.
Sir Keir Starmer has emphasised that growth is the government's number one priority; however, economists and the business community have raised concerns about the impact of possible tax rises on growth. The chancellor faces a difficult balancing act at the Autumn Budget, particularly given the constraints arising from the pledges made.
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