Key Budget Changes

On 30 October 2024, the Labour Party announced its first budget since coming to power, aligning with Labour’s manifesto “Fixing the Foundation to Deliver Change.” This budget introduces measures designed to raise taxes to fund social reform and improve public services.

Below is a summary of the key changes that have raised the most concerns among our clients. Please note that this is not an exhaustive list of all changes.

VAT

• Unsurprisingly, private school fees will now be deemed a taxable supply. This means VAT will be applied to school fees starting from 1 January 2024.

Stamp Duty

• Threshold Reduction: Stamp duty tax-free thresholds will decrease from 1 April 2025, leading to higher stamp duty collections by the government. For example, buying a house for £295,000 will incur an additional £2,500 in stamp duty.
• First-Time Buyers: The first-time buyer threshold, currently set at £425,000, will reduce to £300,000 from 1 April 2025, increasing costs for those entering the housing market.
• Additional Properties: Investors or individuals purchasing additional properties (those owning more than one house) face an increased additional rate band, rising from 3% to 5%, effective immediately.

National Insurance

• Employer Contributions: Employer National Insurance contributions will increase by 1.2% from April 2025.
• Employment Allowance: The allowance will rise to £10,000, allowing qualifying employers to avoid paying the first £10,000 in employer National Insurance.
• Threshold Reduction: The threshold at which employers begin paying National Insurance will decrease to £5,100.

These changes will have varying impacts depending on the employer. For small businesses, the increase in employment allowance may be beneficial, but many employers will face higher costs. If you are a director of a company, we recommend reviewing your profit extraction strategy.

Inheritance Tax

• Relief Cap: Agricultural and business property relief will be capped at £1,000,000 from 6 April 2026.

Previously, qualifying businesses or agricultural properties could be passed to the next generation completely free of inheritance tax. These provisions were initially introduced to ensure family businesses could continue without needing to sell assets to cover tax liabilities.

While smaller businesses may not feel the impact, larger businesses and farms, especially those in Gloucestershire, will face significant challenges under this new legislation. Discussions are ongoing with those affected to explore options such as revising wills or gifting business assets now, with the hope that these transfers will fall outside the scope of inheritance tax after seven years.

Seeking Expert Advice

If you are concerned about the recent budget changes or require a comprehensive tax review, our team is here to help. As a trusted Bristol accountant, we offer tailored advice to businesses and individuals. Contact us today to ensure you are prepared for these upcoming changes.