UK Autumn Budget 2024: what UK business tax measures were announced?

The chancellor of the exchequer, Rachel Reeves, delivered the first budget of the new government on 30 October 2024. Despite the constraints of her party's manifesto pledge not to raise taxes on working people, she announced significant tax and spending measures to address a multi-billion-pound deficit in public finances and also encourage economic growth.

Employer's national insurance contributions

Speculation had been mounting (which proved correct) that Labour's manifesto pledge not to increase national insurance only referred to employee national insurance contributions (NICs).

The chancellor announced that the government would raise the rate of employer's NICs from 13.8% to 15% from 6 April 2025. In addition, the government will reduce the threshold at which employers start paying NICs from £9,100 to £5,000 per year from 6 April 2025 until 5 April 2028 (after which it will be increased by the consumer price index).

In an attempt to reduce the impact of these NICs changes for employers, the chancellor announced some changes to the employment allowance (which allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct an amount from their employer NICs bill). The government will increase the employment allowance from £5,000 to £10,500 from 6 April 2025 and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NICs bills from 6 April 2025.

Capital gains tax

Rates on asset disposals including shares

As many had predicted, the chancellor announced that the main rates of capital gains tax (CGT) that apply to assets (other than residential property and carried interest) will be increased. The lower rate will increase from 10% to 18% and the higher rate from 20% to 24% for disposals made on or after 30 October 2024.

The chancellor did not, however, abolish Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs' Relief, but confirmed that the rate of CGT for BADR will remain at its current rate (of 10%) for now but will be increased to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.

The government also announced that the Investors' Relief lifetime limit will be reduced from £10m to £1m (to match BADR's lifetime limit) for qualifying disposals made on or after 30 October 2024.

The chancellor did not increase the rates of CGT on second homes, which remain at 18% and 24% for basic and higher rate taxpayer respectively.

Carried interest

Following the call for evidence and ongoing dialogue with stakeholders over the summer, the chancellor announced that the rate of taxation of gains from carried interest would increase from 28% to 32% from 6 April 2025.

Although this was not as high as some had feared, it is a temporary measure as the government also announced that from April 2026, the carried interest tax regime will be brought within the income tax framework and has published a document with next steps for reform.

Inheritance tax

Nil-rate band and residence nil-rate band

The government confirmed that it will fix the inheritance tax (IHT) nil-rate bands for a further two years until 5 April 2030, meaning that the nil-rate band will continue at £325,000 and the residence nil-rate band at £175,000.

The chancellor also confirmed that qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an IHT liability.

Agricultural property relief and business property relief

As expected, the government will reform the generous business property relief (BPR) and agricultural property relief (APR), which allow some assets to be passed on free of IHT (or with a reduced bill).

From 6 April 2026 the existing 100% rates of relief will continue for the first £1 million of combined agricultural and business property, but the rate of relief will be 50% thereafter and the rate of relief will be 50% in all circumstances for shares designated as "not listed" on the markets of recognised stock exchanges, such as AIM.

This will likely provoke a shake-up in estate planning for married couples holding interests in businesses and agricultural property, as the £1m threshold is not transferable. Many will wish to ensure that they maximise the relief by leaving assets qualifying for 100% relief to their children on the first death.

Pensions

The government announced that from 6 April 2027 most unused pension funds and death benefits will be included within the value of a person’s estate for IHT purposes and pension scheme administrators will become liable for reporting and paying any IHT due on pensions to HMRC.

A consultation on the processes required to implement changes to IHT rules has been published.

For more on pensions, see our Insight.

Non-dom rules reform

The government confirmed that it will abolish the remittance basis of taxation for non-UK domiciled individuals and will replace it with a simpler and internationally competitive residence-based regime, which will take effect from 6 April 2025.

The removal is accompanied by a new generous regime for new arrivals, allowing them a complete exemption on foreign income and gains (FIG) they receive during their first four years of UK tax residence.

It is also accompanied by the expected Transitional Remittance Facility (TRF), giving taxpayers currently on the remittance basis the ability to designate FIG they received on that basis for a one-off TRF charge of 12% in 2025-2027 and 15% in 2027/8. The TRF has been developed in a very user-friendly way, allowing FIG to be designated without having to remit it and extends to UK investments made under the Business Investment Regime.

There are some extremely complex changes to the taxation of offshore trusts and trust distributions, which allow distributions to be received under the FIG or TRF regimes but great care will have to be taken to ensure maximum benefit is made of these transitionary opportunities.

From 6 April 2025 the government will also introduce a new residence-based system for IHT, ending the use of offshore trusts to shelter assets from IHT and scrap the planned 50% reduction in foreign income subject to tax in the first year of the new regime. The new regime replaces domicile with the concept of "long-term residence", applying to any individual living in the UK for 10 out of 20 tax years.

Real estate tax

Stamp duty land tax

The chancellor announced that from 31 October 2024 the stamp duty land tax (SDLT) surcharge (the higher rate on additional dwellings) payable on purchases of additional residential properties in England and Northern Ireland by individuals and purchases of residential properties in England and Northern Ireland by companies, will be increased from 3% to 5%.

The government did not take forward a measure from the Labour manifesto to increase the surcharge that applies to non-resident buyers of residential properties. This is a separate charge and can apply in addition to the above. It was expected to go up from 2% to 3%.  It may be that the government concluded that increasing the higher rate charge above, which will also apply to non-residents, was sufficient (for now).

The single rate of SDLT payable by companies and non-natural persons acquiring residential properties in England and Northern Ireland for more than £500,000, will also be increased from 15% to 17% from 31 October 2024.

Reserved Investor Fund

The government confirmed that it will proceed with the introduction of the Reserved Investor Fund (RIF) which had been originally announced at Spring Budget 2024. Secondary legislation will be brought forward before the end of the tax year 2024 to 2025.

Although this is a new type of UK-based investment fund, it is expected to be particularly attractive for real estate funds.

Business rates reform

The government announced that it will introduce permanently lower business rates for retail, hospitality and leisure properties from 2026-27 to level the playing field for the high street and has published a document setting out immediate actions and areas of interest for further reform.

Employee incentives

The government confirmed that, following an HMRC consultation, it will introduce legislation in the Finance Bill for a package of reforms to the taxation of Employee Ownership Trusts (EOTs) and Employee Benefit Trusts.

These reforms clarified a number of points and will ensure that the regimes remain focused on encouraging medium to long-term employee ownership and prevent opportunities for abuse. Perhaps unexpectedly, the majority of changes will only apply to disposals claiming EOT relief, and therefore companies becoming EOT controlled, from 30 October 2024.

No update was provided on the separate consultation on proposed improvements to tax-advantaged all-employee plans – perhaps not surprising given the bigger picture – so this is still awaited by the share plans community.

VAT on private school fees 

The government reconfirmed that, as of 1 January 2025, VAT would be levied on private school fees and charitable rates relief would be removed for private schools (although the material published at the budget addresses the VAT changes only). Any fees paid from 29 July 2024 relating to the term starting in January 2025 onwards will be subject to VAT.

Energy Profits Levy

The government had previously announced that the rate of the Energy Profits Levy would increase to 38% from 1 November 2024 and would be extended for an additional year to 31 March 2030.

The legislation, to be included in the Finance Bill, will also remove the 29% investment allowance, and the rate of the decarbonisation allowance will be set at 66% to broadly maintain the cumulative value of relief for decarbonisation expenditure. These changes will take effect from 1 November 2024.

Green measures

Capital allowances for zero-emissions cars and electric vehicle charge-points

The government will introduce legislation in Finance Bill to extend the 100% first-year allowances for zero-emission cars and electric vehicle charge-points until 31 March 2026 for corporation tax and 5 April 2026 for income tax.

UK Carbon Border Adjustment Mechanism

As previously announced, the government will introduce a new environmental tax known as the UK Carbon Border Adjustment Mechanism (CBAM) from 1 January 2027. The CBAM will place a carbon price on goods at risk of carbon leakage imported to the UK from the aluminium, cement, fertiliser, hydrogen, iron and steel sectors that are at risk of carbon leakage.

The government will introduce legislation in Finance Bill to allow HMRC to prepare for the introduction of the CBAM.

Tax administration

Corporate tax roadmap

As expected a Corporate Tax Roadmap was published which focuses on the growth agenda and creating a stable environment for business tax. It confirmed that the main rate of corporation tax will be capped at its current level (25%) for the duration of this parliament, full expensing for plant and machinery will be retained alongside the £1m annual investment allowance and the current rates of research and development reliefs will also be maintained.

The roadmap also confirms that there will be a consultation on a new process to give businesses certainty on the taxation of big investment projects and a further consultation on reforms to the UK’s rules on transfer pricing, permanent establishments, and Diverted Profits Tax – including the potential removal of UK-to-UK transfer pricing.

Closing the tax gap

A range of measures were announced to close the tax gap, including investing in additional HMRC compliance staff, modernising HMRC systems and tackling non-compliance.

One area marked out as having significant levels of tax avoidance and fraud was the umbrella company market. The government announced that it will introduce legislation in a future Finance Bill which will take effect from April 2026 to make recruitment agencies responsible for accounting for PAYE on payments made to workers that are supplied using umbrella companies. Where there is no agency, this responsibility will fall to the end client business. A policy paper has also been published.

Osborne Clarke comment

This budget, being the first one in a new government, was always going to be significant and was expected to be "painful" (in Sir Keir Starmer's own words). While some of the predictions swirling in the run up to the budget did not materialise, such as the extension of the freeze on income tax personal thresholds or the reduction of higher rate pensions tax relief, this budget was packed full of measures to plug the fiscal black hole and to encourage economic growth while honouring the government's manifesto promises.

While employers will feel the brunt of the tax rises, the publication of the Corporate Tax Roadmap should give businesses more confidence to make long-term investment decisions against the backdrop of a stable corporation tax landscape, although the document stops short of ruling out other business tax rises in the future.