Today’s Budget marks a pivotal shift in the UK’s tax landscape, with Chancellor Rachel Reeves introducing measures aimed at economic renewal and raising £40bn through a mix of tax increases and public investment. For LEXeFISCAL clients, these changes carry notable implications across personal and corporate tax, investment strategies, and operational costs. Here’s a breakdown of the key points.
Capital Gains and Inheritance Tax
Reeves announced an increase in Capital Gains Tax (CGT) rates, with the basic rate rising from 10% to 18% and the higher rate from 20% to 24%. This adjustment significantly affects clients with investments, shares, or second homes, likely reducing after-tax gains on disposals. LEXeFISCAL recommends revisiting investment strategies to assess tax-efficient timing and available reliefs, particularly for those planning asset disposals. Additionally, an extended freeze on the inheritance tax (IHT) threshold means £325,000 can still be inherited tax-free. However, for assets exceeding £1m, such as business and agricultural property, a 20% IHT will apply, making estate planning even more critical for those with significant business assets.
National Insurance and Business Impacts
Businesses face an increase in employers' National Insurance contributions, which will rise by 1.2 percentage points to 15% from April. Additionally, the secondary threshold will decrease from £9,100 to £5,000, which could increase payroll expenses for many employers. These measures, expected to generate £25bn annually, underscore the importance of workforce planning for affected clients. To mitigate costs, companies might consider optimising staff structures, exploring tax relief options, or enhancing efficiency within payroll systems. For clients in the retail and hospitality sectors, the 40% relief on business rates (up to £25,000) offers some offset, though the cap means larger operations may still feel the strain of increased overheads.
Non-Domicile Status Abolition
The removal of non-domicile (non-dom) status will take effect from April, a move likely to impact many high-net-worth and internationally mobile clients. With this change, long-term residents who previously leveraged non-dom status for tax efficiencies may now need to reassess their residency and asset-holding structures. At LEXeFISCAL, we’re prepared to assist clients in evaluating the tax consequences of domicile status and exploring alternative solutions for maintaining financial flexibility.
VAT on Private School Fees and Adjustments in Income Tax
VAT on private school fees will be introduced in January 2025, a decision likely to impact families currently planning educational expenses. In the realm of personal taxation, income tax thresholds will be uprated in line with inflation starting in 2028/29. While these changes may not immediately affect household budgets, they highlight the need for clients to stay informed on future tax obligations as inflation-adjusted brackets come into play.
Corporate and Sectoral Investment
The government’s commitment to increasing public investment includes £5bn earmarked for affordable housing, infrastructure, and £6.1bn across engineering, biotechnology, and medical sciences. For businesses in these sectors, new funding opportunities and grants could support expansion. Furthermore, the launch of ‘Great British Energy’ in Aberdeen and the expansion of life sciences with a £500m allocation emphasise the government’s focus on renewable energy and innovation-driven growth. Clients in these industries should explore potential incentives and financing options that align with these targeted investments.
Energy, Housing, and Public Sector Funding
The freeze on fuel duty for another year provides some stability for logistics-based businesses, while the £5bn allocated to housing will be instrumental in increasing the supply of affordable homes. The government also plans to hire new planning officers, a promising step towards expediting construction projects, which could benefit clients in property development. Additionally, increased funding for education, healthcare, and social care indicates a shift towards strengthening public sector infrastructure, potentially benefiting clients in service sectors linked to public contracts or partnerships.
Aviation and Transportation Levies
With air passenger duty set to increase for private jet travel and slight adjustments in economy rates, businesses relying on international travel may experience rising costs. However, funding towards rail networks and the tunnelling for HS2 to London Euston aligns with an infrastructure focus that could improve connectivity for northern and central UK clients.
Tax Avoidance and Compliance Enhancements
Reeves announced measures aimed at raising £6.5bn by targeting tax avoidance through umbrella companies and other structures. Enhanced compliance measures indicate that businesses should ensure thorough adherence to updated tax protocols and consider periodic audits to pre-empt regulatory scrutiny.
In light of these Budget changes, clients are encouraged to assess their tax strategies and operational plans with expert support. For tailored advice on navigating this evolving tax environment, reach out us or visit www.lexefiscal.com.
Our team is ready to help you optimise your tax position and align with the latest regulatory requirements in a way that protects and enhances your financial health.
Get in touch:
Dr Clifford John Frank
LLM (Tax), HDIpICA, PhD, CPA
Partner
Mr Angelo Chirulli
Master’s Degree, ACA, ADIT, BFP
Tax Partner
Email: angelo@lexefiscal.com
Telephone
+44 (0) 208 092 2111
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