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Chancellor Rachel Reeves has announced her Budget 2024 that consists of a very well rounded statement of the country’s public finances by Office for Budget Responsibility (OBR). This is considered the moment of truth- as this will be depicting how the government intends going about their economy and budget of public finances. Of late, the following presents what Chancellor Rachel Reeves went live to present.
Corporate Tax Roadmap
The Corporate Tax Roadmap published by the UK government offers companies and investors openness, consistency, and predictability. With these changes, the government hopes to build a competitive and resilient fiscal landscape where businesses of all sizes may prosper under a clear and stable tax structure.
Here’s a summary of the important developments affecting UK corporations, small businesses, and investors.
Key Elements of the Corporate Tax Roadmap
The Corporate Tax Roadmap strives to give businesses and investors consistency, stability, and confidence. The key features are:
Corporate Tax Rate
The headline Corporation Tax rate will remain at 25% during the current parliamentary term. This cap is intended to make the UK’s tax system more competitive worldwide. The government would also keep the Small Profits Rate and marginal relief at their current levels, providing clarity for smaller businesses about their tax burden.
Capital Allowances
The government intends to make full expensing a permanent feature to foster corporate growth. Businesses can claim the £1 million Annual Investment Allowance in addition to other capital allowances such as write-down allowances and the Structures and Buildings Allowance.
The government would consolidate the Capital Allowances Act of 2001 to provide transparency, simplifying how businesses assess whether expenses qualify. A consultation is intended to investigate tax treatment for predevelopment costs, which may provide greater clarification regarding taxation.
R&D Tax Reliefs
The UK’s unified R&D Expenditure Credit program and Enhanced Support for R&D Intensive SMEs will continue encouraging innovation and research expansion.
HMRC will establish an R&D expert advisory council to assist firms with improved guidance on claiming relief. This will be reinforced by an R&D disclosure tool launched by the end of the year to ensure the scheme’s compliance and integrity.
Patent Boxes and Intangible Assets
The Patent Box scheme, which provides an important incentive for innovation, remains in existence. The government will also keep the intangible fixed assets framework, providing sustained support for intellectual property holders in the UK.
Incentives for Creative Industries
Audio-Visual and Video Game Expenditure Credits will be preserved, aiding filmmakers, high-end TV producers, and video game creators. These initiatives demonstrate the government’s commitment to helping the UK’s burgeoning creative economy.
Relief in Land Remediation
To improve environmental practices, the government will consult in Spring 2025 to evaluate the success of Land Remediation Relief to enhance incentives for environmental cleaning efforts.
Corporate Tax Administration
A consultation scheduled for Spring 2025 will focus on boosting tax certainty for investors in substantial projects to streamline tax compliance and reduce uncertainty for large-scale enterprises.
Reforming Transfer Pricing
The administration intends to improve transfer pricing rules to comply better with international standards. This involves revisiting the Diverted Profits Tax, decreasing requirements for medium-sized enterprises, and improving cross-border transaction transparency. A consultation on these improvements is scheduled for Spring 2025.
OECD Pillars 1 and 2
As international tax rules evolve, the UK matches its tax rules with OECD Pillar 1 and 2 recommendations. Legislation in the Finance Bill 2024-25 implementing the Pillar 2 Undertaxed Profits Rule (UTPR) will apply to account periods starting on or after December 31, 2024..
Business Rate Reforms and Initiatives
Here is an overview of the Business Rates:
A Business Rates Discussion Paper
Launched to safeguard high-street companies, boost investment, and create a more fair rate system, a new discussion paper on business rate reform.
The Small Business Multiplier Freeze
The standard multiplier will be changed to 55.5p in line with the CPI rate for September 2024.
Retail, Hospitality, and Leisure Properties
In 2025-26, the relief for qualified RHL homes will be reduced from 75% to 40%, with a maximum reduction of £110,000. RHL properties will benefit from permanently reduced multipliers beginning in 2026-27, whereas properties with Rateable Values greater than £500,000 will have a higher multiplier to compensate for the lower rates in RHL sectors.
Additional Corporate Measures
- Green First-Year Allowances
To encourage environmentally friendly company practices, the 100% First Year Allowances for qualifying zero-emission vehicles and electric vehicle charging stations will be extended until March 2026 for corporation tax purposes and April 2026 for income tax purposes.
- Enhanced Film Tax Credit
The government will grant an improved Audio-Visual Expenditure Credit of 53% for films with budgets under £15 million and a UK-based main writer or director, beginning in April 2025, to promote the growth of smaller film productions in the UK.
- Tax Relief for Theaters, Orchestras, and Museums
Tax reduction for theatre, orchestra, and museum displays will be 40% for non-touring shows and 45% for touring productions beginning in April 2025, offering increased financial support to cultural sectors.
- Adjusting the Energy Profits Levy
The Energy Profits Levy will rise 3% to 38% in November 2024, while the decarbonization allowance will fall from 80% to 66%. Additionally, the 29% investment allowance will be eliminated.
- Changes in Taxation for Alternative Finance
The tax rules governing alternative finance will be amended on October 30, 2024, to ensure fair treatment alongside conventional finance to level the playing field for alternative financing techniques.
- Reserved Investors Fund
The Reserved Investor Fund (Contractual Scheme) and small tax changes for Co-ownership Authorized Contractual Schemes will simplify investor alternatives.
A Summary of Business Tax Initiatives
The Corporate Tax Roadmap includes several policies to increase corporate stability, predictability, and transparency.
Employers' National Insurance Contributions
From April 2025, the employer National Insurance threshold will be cut to £5,000, but the contribution rate will rise by 1.2% to 15%.
Non-Domiciled Individuals
Starting April 2025, the remittance basis of taxation for non-domiciled individuals will be abolished, fundamentally changing taxation policy for non-UK domiciles.
Changes in Carried Interest Tax
Carry interest will be subject to a 32% rise in Capital Gains Tax (CGT) for one year before switching to the income tax regime.
Consultation Regarding Business Rates
A consultation on business rate reforms will continue until October 31, 2024, to consider proposals that benefit business owners across the UK.
Employment Taxes
National Living and Minimum Wages
- Minimum National Wage: Young adults, specifically those 18 to 20 years of age, will receive an increased wage, now at £10.00 as the National Minimum Wage. It is commendable to see the government standing up and trying to assist the younger generation, some of whom could be first-time workers or juggling schooling with their first job.
- Change in the Rates: The National Living Wage for all employees aged twenty-one years and above is expected to increase by sixty-seven percent to eleven pounds and fifty-five pence from April 25. From the perspective of rising bills for people across the board, this increase is intended to help many gain better earnings.
Contributions to National Insurance
- Employer NIC Rate Revision: The rate of NICs taxed on employers would be increased from thirteen point eight percent to fifteen beginning in April 2025. This contribution increase is a welcome change as the government will draw funding for its social protection services.
- Secondary Threshold Alterations: The secondary tax threshold for when employers begin remitting NICS would be decreased from £9 100 to £5000 every year, beginning from April 2025 to April 2028. After this period, the threshold will align with CPI adjustments, providing a stable framework for future employer planning.
- Employment Allowance Expansion: Eliminating the £100,000 employer’s NIC barrier, the Employment Allowance will rise from £5,000 to £10,500 to help smaller enterprises. More companies can gain from this important relief by increasing eligibility and reducing staffing expenses for companies of different sizes.
Payrolling Benefits in Kind
- Real-Time Reporting of Benefits: From April 2026, employers will be required to report and pay tax and Class 1A NIC on kind benefits in real-time. This will apply to most benefits except accommodation and loans, which can be handled voluntarily.
- New End-of-Year Process: A new year-end process will be introduced to handle adjustments in benefits reporting. This streamlined reporting structure aims to improve transparency and simplify compliance, with further guidelines to be released on specific application scenarios.
Overseas Workday Relief
Overseas Workday Relief will continue for employees working outside the UK as part of the non-domicile reform. However, relief will be capped at 30% of qualifying income or £300,000 per tax year. Additionally, the qualifying period extends from three to four years to ease administration and provide a consistent payroll process for international businesses.
Additional Employment Tax Measures
- Company Car Tax (CCT): For the fiscal years 2028-29 and 2029-30, Company Car Tax rates will increase for zero-emission and electric vehicles by 2% per year, reaching 9% by 2029-30. Cars with 1-50 g/km CO2 emissions, including hybrids, will see APs increase to 18% and 19% over these years. This gradual adjustment encourages eco-friendly choices while ensuring fiscal stability.
- Car Ownership Arrangements: From April 2026, new legislation will address tax loopholes in car ownership arrangements, particularly where employees buy cars from employers at negligible cost and then resold. This move ensures that company car taxes are applied fairly across all ownership arrangements.
- Umbrella Companies: Effective April 2026, recruitment agencies will be responsible for PAYE accounting for umbrella company payments. Where no agency is involved, this duty will fall to the end client, streamlining accountability within contract work and agency hiring.
- Apprenticeship Levy Transformation: Investing £40 million, the government is transforming the Apprenticeship Levy into a Growth and Skills Levy, therefore providing more freedom for industry-wide skill-building and workforce development.
Personal Tax Changes
Income Tax Freeze and Thresholds
Aiming to provide certainty to taxpayers during difficult economic times, the government has kept income tax rates and thresholds frozen until April 2028. These levels will rise in step with inflation after 2028, preserving their value in the framework of a changing economy.
Non-Domicile People: Eliminating Remittance Basis
Effective April 2025, a resident-based tax system will replace the remittance basis of taxes for non-domiciled individuals, eradicating them. For non-UK domiciled people, this marks a major change since it helps them to match their tax obligations more closely with residents and guarantees fair tax payments.
Capital Gains Tax (CGT) Modifications
Affecting investors and business owners, the CGT main rates will rise to 18% (lower) and 24% (higher) on disposals from October 2024.
Starting at 10% on gains of up to £1 million for the current year, business asset disposal relief and investor’s relief rates will be set at 14% by April 2025, rising to 18% by April 2026, matching the lower main rate of 18%. These changes are meant to bring in more money while keeping incentives for corporate expansion.
Variations in carried interest taxation
From April 2025, carried interest tax rates will climb to 32% and then change to an income tax system by April 2026. With a consultation under progress to define the exact criteria for qualifying carried interest, this reclassification more closely matches earned income.
Reforms on Inheritance Tax (IHT)
Significant adjustments to Agricultural Property Relief and Business Property Relief will apply from April 2026: 100% relief for the first £1 million of combined assets and 50% relief for further assets.
Unspent pension funds will count toward estates for IHT purposes from April 2027; shares listed on non-recognized exchanges will get half relief. These changes seek to modernize and simplify inheritance tax, particularly for enterprises and farms.
Indirect Taxes
VAT on Private Education
Private school costs, including boarding services, will be subject to a 20% VAT starting in January 2025, drastically changing the financial scene for private education.
Furthermore, withdrawal starting April 2025 will be a business rate reduction for private schools, affecting families’ and educational institutions’ further financial concerns.
Tobacco and Fuel Taxes
The government will freeze gasoline duty, extending the existing 5p cut and providing financial assistance to drivers in 2025–26.
Tobacco taxes, on the other hand, will see an RPI+2% escalator for all items, plus an extra 10% hike for hand-rolling tobacco. These developments point to a sensible strategy that supports public health and the economy at the same time.
Alcohol's and Vaping Products' Excise Duty
From October 2026, vaping liquids will pay a flat-rate excise tax of £2.20 per 10ml alongside corresponding tobacco duty increases.
While non-draught products will rise in line with RPI, alcohol duty on draught goods will drop 1.7% in February 2025. These changes give a financial incentive to transition from tobacco to vaping and line up with the health goals of the government.
Levies and Environmental Taxes
- The government will continue supporting electric vehicles, so the differential between petrol and diesel vehicles in Vehicle Excise Duty will be improved from April 2025. Expected to generate £400 million, these incentives will encourage EV acceptance.
- Starting in 2026–27, APD prices will climb by £2 for short-haul and £12 for long-haul flights. Passengers on private jets will experience a 50% APD rise, so supporting environmentally friendly travel options.
- While LPG prices stay frozen, balancing the tax scene for energy usage, CCL rates for gas, electricity, and solid fuels will be changed in line with RPI for 2026-27.
- Plastic Packaging Tax (PPT) adjustments for 2025–26 will follow CPI. In response to industry comments, companies can confirm recycled plastic content using a mass balance method.
- In 2027, the Carbon Border Adjustment Mechanism (CBAM) will tax imported goods like steel and cement under a carbon tax beginning at £50,000 registration limits. This supports domestic producers’ level playing field and fits the climate targets for the UK.
Industry Levy on Soft Drinks, or SDIL
Starting April 2025, the SDIL will rise yearly to reflect changes in CPI from 2018. Additionally under examination are SDIL sugar thresholds and possible exemptions for milk-based beverages to guarantee efficient health-oriented taxes.
Additional Measures
HMRC Expansion of Resources
With 5,000 additional compliance and debt management employees, the government will support HMRC in upgrading systems, including the IHT framework, and improving customer service. This outlay shows a dedication to more effective tax collecting.
Late Payment Interest Rate Rise
HMRC would increase interest rates on overdue tax bills by 1.5% starting in April 2025, encouraging timely tax payments and helping generate public income.
Updated Charity Tax Guidelines
Charity tax standards will be strengthened from April 2026 to prevent misuse, thereby guaranteeing only legal charities gain from tax reliefs and preserving integrity within the charitable sector.
Second Homes Stamp Duty Land Tax (SDLT)
Targeting the buy-to-let and second-home markets, a 5% surcharge on second homes will take effect from October 2024, addressing housing availability and affordability issues.
Bottom Line
The UK’s all-encompassing tax roadmap guides companies and people across economic stability and progress by including key changes across employment taxes, personal taxes, indirect taxes, and compliance.
Understanding these changes will help companies, workers, and taxpayers to proactively plan for the future and match the changing tax environment. Whether budgeting for environmental taxes, new CGT rates, or pay rises, these changes provide clarity and strategic financial management possibilities.
Next Step
Get clear expert advice on how the latest budget 2024 changes could impact your business reach out to IBISS & CO today to keep your finances on track.