Autumn Budget 2024

From 6 April 2025 the rate of employer NIC will increase by 1.2% from 13.8% to 15% and the threshold in which employers start paying employers NIC will be reduced from £9,100 per employee per year to £5,000 per employee per year.

However, eligible employers will see an increase in the annual Employment Allowance which will increase from £5,000 to £10,500. This means that Employers NIC will become payable on liabilities in excess of £10,500 per year. The allowance will also be available to businesses whose employers NIC liability exceeds £100,000 (where previously these businesses would not have qualified for the allowance).

Despite the rise in NIC rates and the drop in the payment threshold, the government believes that the increase in the Employment Allowance means that 865,000 small business employers will pay no NICs next year.

Holly Mitchell, Tax Associate

From 31 October 2024, the Higher Rates for Additional Dwellings surcharge on Stamp Duty Land Tax (SDLT) will increase by 2%, from 3% to 5% above the standard residential rates of SDLT.

These surcharged rates apply to purchases of:

• second homes,
• buy-to-let residential properties
• companies purchasing residential property

The government considers that the increase in the higher rates will provide those looking to move home or purchase their first property with a comparative advantage over those purchasing additional property. The measure is expected to result in 130,000 additional transactions over the next five years by first-time buyers and other people buying a primary residence.

This surcharge is also paid by non-UK residents purchasing additional property, in addition to the 2% non-resident surcharge.

From the same date, the single rate of SDLT payable by companies and other non-natural persons purchasing dwellings over £500,000 will also increase from 15% to 17%. No changes to the existing reliefs from the higher rate charge have been announced.

Both changes apply to transactions with an effective date (usually completion) on or after 31 October 2024 however, in most cases, there should be no impact where contracts were exchanged prior to 31 October 2024.

Rachel Pearce, Tax Partner

Following its initial announcement on 29 July, the government confirmed that as part of its commitment to ensuring every child achieves access to a high-quality education, it would be pressing ahead with its introduction of a VAT charge at the standard rate (20%) on education and boarding services, where these are provided by private fee-paying schools with effect from 1 January 2025.

The government confirmed that it is expecting to raise £1.8m per year by 2029-30, from taxing the provision of education by Independent Schools, and that this would assist it with securing additional funding to help deliver commitments relating to education and young people. The government also confirmed that Independent Schools in England will, with effect from April 2025, lose their entitlement to business rates charitable rate relief.

This change in VAT treatment will have a very far-reaching impact on the education sector in the UK, and the government acknowledges this. Therefore, it has been consulting with stakeholders and interested groups on how it can minimise the impact of the change. For instance, the government indicated that in order to support pupils with special educational needs which can only be met in a private school, they will compensate local authorities and devolved governments that fund such places in the Independent schools, for the VAT amounts incurred in respect of those pupils’ fees. The government also confirmed that Independent schools that “wholly or mainly” provide full time education to pupils with an Education, Health and Care Plan will remain eligible for business rates charitable relief.

Thomas Mobee, VAT Director

Although it didn’t get any coverage in the Chancellor’s Budget speech, Employee Ownership Trusts (“EOTs”) did experience some changes. Many of the changes in the Chancellor’s Budget are simply implementing rules which tighten up areas of potential abuse. These were highlighted during the consultation process carried out by the previous Conservative Government.

These changes are effective from 30 October 2024 for disposals taking place after this date and are as follows:

• Restrict former owners or persons connected with former owners from retaining control of the company post-sale to an EOT by virtue of control (direct or indirect) of the EOT. Former shareholders that are trustees need to be outnumbered by other unconnected individuals;
• Trustees of an EOT must be UK resident (as a single body of persons) at the time of disposal to the EOT;
• Trustees must take reasonable steps to ensure that the consideration paid to acquire the company’s shares does not exceed market value. This makes a professional valuation more important to help protect their position;
• Extending the ‘vendor clawback period’, (within which the tax relieved can be recovered from the vendor in the event of a disqualifying event post-sale), to the end of the fourth tax year following the tax year of disposal compared to one tax year it was previously;
• Require that individuals provide, within their claim for Capital Gains Tax relief, information on the sale proceeds and the number of employees of the company at the time of disposal;
• Confirmation that contributions made to the EOT to cover costs and the sale consideration is not a distribution for income tax purposes.

Andrew Neuman, Tax Director

From 6 April 2025, those who are resident in the UK but domiciled overseas will no longer have access to the ‘remittance basis’ of taxation. Up to now, this has allowed them to elect to not be taxed in the UK on foreign income and gains if they leave the money overseas.

There are also significant changes to the assets that will be within charge to Inheritance Tax (IHT) for those previously regarded as foreign domiciled, and to Overseas Workday Relief that can exempt them from UK tax on earnings derived from non-UK duties.

Nikki Martin, Tax Associate