The 2024 Budget (due 30 October) will be the first budget of the new Labour Government. We can expect to see some dramatic changes from the last few years, and we will of course help you navigate the coming changes.

Some of the headline rumours include planned raised to Capital Gains Tax (CGT), National Insurance for Employers, and Inheritance Tax.

Business Headlines

The government has pledged to “cap” Corporation Tax at the current rate of 25%. There has, however, been no mention of keeping, or freezing the small profits rate at the current 19% (for profits below £50,000), or retaining the taper rates for profits of £50,000 – 250,000.

Emily Coltman, chief accountant at our accounting software partner FreeAgent, reflected on this recently. “Is this potentially a warning sign that the chancellor will increase the rate for small companies from 19% to 25%? I very much hope not but, if I were running a small company, I would start putting more money aside to pay a possibly higher tax bill.”

In addition to the above, businesses should also take note of the Employers NI increases that are likely, and possible changes to benefit in kind tax on company cars, both outlined below.

Capital Gains Tax (CGT)

Changes to the treatment of “carried interest” are expected, as well as to the rates of CGT on some (but not all) assets. Rumours suggest we are likely to be looking at an increase in the main rate of CGT, but that it will remain unchanged for residential property.

Further reports suggest that Business Asset Disposal Relief may be scrapped, possibly teamed with more generous deductions for investment costs.

Inheritance Tax (IHT)

The most persistent rumours on this are around the restriction of (or possibly scrapping of) both business and agricultural reliefs. It is widely rumoured that this is likely to be capped at £500,000 per person.

Other suggestions are that the current “seven year rule”, for potentially exempt transfers, may be extended to ten years. It is worth noting that a 2019 report by the Office of Tax Simplification recommended reducing the qualifying period to just five years, but removing the taper relief (a sliding scale that sees a reduction in the tax paid from three years after the transfer (the 40% reduced by 8% each year until hitting 0% after seven years).

It is looking increasingly likely that the current exemption from IHT on shares in smaller companies which are listed on the Alternative Investment Market (AIM) may be scrapped. It is not clear whether this may be changed to include all shareholdings, including those in private companies. It is also possible that the current two-year holding requirement could be extended, possibly with different relief bands before full relief is claimable.

The last speculation is that IHT may be imposed on the pension pots of those who die before the age of 75 (as they already are for over 75 year olds).

One final note of caution around IHT reform – perhaps not in this budget, but as a direction of travel under the new Government – In a 2008 book titled “The Everyday Economy”, Rachel Reeves (the current Chancellor of the Exchequer) criticised IHT loopholes, and said that the tax needed to either be reset or “shifted wholesale” to a tax on the receipt of any gifts throughout a lifetime.

Employment Taxes

One of the most widely rumoured increases in tax expected to be announced on budget day, will be an increase in the rate of Employers National Insurance (NI), as Labour MPs from Prime Minister Sir Keir Starmer downwards have emphasised that their manifesto pledge not to raise NI only applied to employees.

Two possible routes for this are being touted, first an increase in the headline rate from the current 13.8%, and second to apply employer NI to employer’s pension contributions. Both proposals have drawn criticism from business leaders, who rightly warn that this is likely to lead to job losses and wage cuts / freezes. Anna Leach, chief economist at the Institute of Directors said that “Increasing employers’ NI would be a bad idea,” emphasising the impact it would be likely to have on business’ costs, and stagnating employee numbers.

What has not been touted as widely, but may be being considered, would be a cut to, or the removal of, the employment allowance. Which writes off the first £5,000 of employers NI. It is our opinion that this would have a catastrophic impact on the smallest businesses, who often only have one or two employees, and who’s NI bill is significantly reduced (sometimes even to £0) by this allowance.

For employees, it looks likely that while there will be no increase in the rates on Income Tax, or employees NI, there will also be no increase in income tax allowances, with sources widely quoting that a further two year freeze is likely to be announced.

While there was reporting over the summer that higher rate tax relief for pension contributions was being considered, the quiet since suggests that a proposal put forward by Treasury officials for a flat 30% rate of pension tax relief are not likely to make it into this months’ budget.

Fuel Duty

A Conservative government effectively scrapped the fuel duty escalator some ten years ago. The new Labour government has already recommitted to introducing a ban on the sale of new combustion engine cars by 2030 so the Chancellor may choose to underline this green move by reinstating the fuel duty escalator. Along similar lines, it would come as no surprise to see the benefit in kind tax rates for company cars increased for combustion engine cars in the run up to this 2030 deadline.

VAT on School Fees

Details were published on 29 July 2024 on the details of the VAT charge that will apply to private school fees from 1 January 2025. Unfortunately, beyond facing harsh criticism from the education sector for being imposed mid-academic-year, the publication leaves numerous questions unanswered. We hope, like many others, that following consultations, HMRC will publish full guidance on the changed, and how schools are expected to implement them.

Other Measures

Home buyers may face up to an additional £2,500 in stamp duty land tax if plans to end some discounts are introduced.

New plans to combat tax avoidance and evasion are expected to be announced.

Plans for business rate reform are likely to be announced, or at least a roadmap for these.

The budget will include a “Business Tax Road Map” being issued for consultation.

Significant tax raises are likely for the gambling sector.

A higher tax on vaping products is likely.

To summarise, the Prime Minister has already warned of a “painful” Autumn Budget 2024, with “unpopular decisions” on 30 October. Keep an eye on this page, as we’ll be publishing a “first thoughts” within 24 hours of the budget speech, and a full analysis in the days and weeks following.