The Autumn Budget 2024 For HNWIs & Business Owners

A Budget for Change?

The Chancellor of the Exchequer, Rachel Reeves, presented her first Budget on 30th October, aiming to address the UK’s financial deficit. Covering various taxes outside of Labour’s ringfenced commitments, the Budget attempted to provide certainty for non-doms by clarifying changes to the non-dom regime, including inheritance tax (IHT) implications. However, whether these modifications will halt the exodus of wealthy non-doms remains uncertain.

The Budget included a shift in carried interest taxation from capital gains to income tax, impacting private equity firms. Additionally, from April 2026, inheritance tax relief for agricultural and business property will face new caps, and employer NICs will rise. Other changes encompass a moderate increase in capital gains tax (CGT) rates and a new 2% increase on SDLT for second-home buyers, raising questions about the Budget’s effectiveness in closing the financial shortfall.

 

Reform to ‘non-dom’ Taxation

Substantial reforms are underway for non-UK domiciled individuals, affecting their tax status. The remittance basis will end in April 2025, introducing the FIG regime with 100% relief for foreign income for the first four years of UK residence. The temporary repatriation facility offers reduced rates for remitting past income, potentially enticing non-doms to transfer foreign funds. Changes also address inheritance tax by shifting to a residence-based system, impacting long-term residents. Trust protections will diminish, depending on the settlor’s status.

While some campaigners lobbied for a more attractive regime for ultra-high net worth individuals, the Budget did not introduce further incentives. Overall, despite the Chancellor’s aim to create a competitive regime, uncertainty remains over the UK’s appeal for affluent non-doms.

 

Inheritance Tax: Agricultural & Business Property Relief Reform

From April 2026, agricultural and business property reliefs will be capped, affecting business owners and farmers. The new caps, which limit 100% relief to £1 million in assets, are expected to increase IHT liabilities, prompting many to review succession plans. Farmers, especially, may face increased pressures, potentially requiring the sale of assets to cover IHT costs. Fragmenting ownership and involving family members in asset ownership may help mitigate IHT impacts.

 

Changes to Capital Gains Tax (CGT) Rates

CGT rates have risen to 18% and 24% for disposals post-30 October 2024. Reliefs such as Business Asset Disposal Relief will remain at 10% until April 2025 but rise in the following years. A reduction in the Investors’ Relief lifetime allowance will impact investors, though no changes were made to residential property gains CGT rates.

 

Carried Interest: Transition to Income Tax

The Government will tax carried interest as income from April 2026. While the rate effectively reaches 32.6%, consultation on access to reduced rates for “qualifying” carried interest is underway. This shift from capital gains to income tax might prompt changes in fund structures.

 

New Stamp Duty Land Tax Rates for Second-Home Owners & Companies

Stamp Duty Land Tax (SDLT) has increased for second-home buyers and certain companies. The surcharge rises from 3% to 5%, affecting property investors, including companies buying high-value dwellings. This could reduce the appeal of additional properties, with companies now facing a flat SDLT increase to 17% on high-value purchases.

 

Budget Implications for Country House Buyers

Country house purchases face an SDLT increase, raising costs significantly. Mixed-use properties, which fall under non-residential SDLT rates, may become more attractive due to potential tax savings. Increased scrutiny of mixed-use claims by HMRC is expected, with new resources allocated for oversight.

 

National Insurance Contributions (NIC) Changes

The Budget leaves employee NICs unchanged but significantly reduces the threshold for employer NICs. This change will increase employer costs, especially for businesses with low-wage employees. The Employment Allowance will rise, benefiting small businesses, while NIC relief for hiring veterans extends another year.

 

Employer Payrolling of Benefits in Kind

From April 2026, it will be mandatory to payroll most benefits in kind, excluding loans and accommodation. The latter will have voluntary payrolling options before mandatory compliance in the future.

 

Employee Share Plans

CGT and NIC changes will impact employee share plans, potentially increasing CGT for non-tax-advantaged plans. Statutory share plans may offer a solution for tax savings as CGT rates climb. The Government is reviewing feedback on Share Incentive Plans and Save As You Earn schemes.

 

Employee Ownership Trust (EOT) & Employee Benefit Trust (EBT)

New EOT regulations take effect from 30 October 2024, focusing on limiting relief abuses while supporting employee ownership. The rules prevent former owners from retaining control through EOTs, require trustees to remain UK-resident, and extend CGT relief clawback periods, among other changes.

 

VAT on Private School Fees

Private school fees will incur VAT from January 2025, though certain exclusions apply, including Higher Education. Anti-forestalling measures ensure fees pre-paid for future terms are taxed, despite significant consultation feedback. While many middle-income families may find private education unaffordable, the Government expects most families to absorb the VAT increase.

 

Corporation Tax Road Map

The Budget retains a 25% corporate tax rate and introduces incentives for capital investment, including allowances for machinery and structures. R&D support continues, fostering innovation and growth among SMEs, while Patent Box and Intangible Fixed Asset regimes remain to support intellectual property investment.

 

International Corporate Tax Issues

Upcoming consultations will address corporate tax issues, focusing on transfer pricing and profit shifting. The Government aims to align with OECD’s BEPS Pillar One and Two, enforcing fair taxation for multinationals and implementing a global minimum tax rate.

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