The Bank of England has cut its base interest rate again, this time lowering it from 5% to 4.75%. This is the second cut this year, following the reduction from 5.25% to 5% in August. With these drops, we are seeing the most significant rate reduction actions in recent years, and they will bring a few noticeable effects across borrowing, saving, housing, and broader economic dynamics in the UK.

Impact on Borrowers and Homeowners

For those with variable-rate mortgages-like tracker or standard variable rate (SVR) mortgages-these reductions should lead to lower monthly repayments, as lenders tend to adjust their rates to reflect the base rate change. However, the extent of these savings and the speed at which they’re passed on vary among lenders, and some may delay making changes.

For homeowners with fixed-rate mortgages, this base rate cut won’t lead to immediate changes. Still, it could affect future fixed-rate deals, potentially making them more attractive and accessible for those considering refinancing or new home purchases.

Effect on Savers

While borrowers benefit from lower interest rates, savers could feel a pinch. Banks typically reduce interest rates on savings accounts after a base rate cut, which would mean savers may earn less interest on their deposits. With these recent reductions, financial experts are advising UK savers to consider securing higher rates while they’re still available in some products, as further cuts may reduce returns even more.

Martin Lewis and other financial advisors recommend checking current savings account options to lock in better rates now, as the downward trend in interest rates may continue in the short term.

Housing Market Dynamics

The continued lowering of interest rates is anticipated to stimulate activity within the housing market. Reduced borrowing costs mean that mortgages could become more affordable, which might drive up demand for property and support housing prices in the short term.

In October, house prices already saw a slight increase, and mortgage approvals reached a two-year high, pointing to a potential resurgence in housing demand. However, it’s worth noting that house prices remain influenced by other factors like overall economic stability, affordability, and consumer confidence.

Broader Economic Implications

The cut to 4.75% comes as the Bank of England aims to support economic growth amid economic headwinds. Lowering the interest rate can make borrowing cheaper, which in turn encourages consumer spending and business investment. Both of these factors are vital to fostering economic growth, as seen in recent figures showing a 0.2% rise in GDP in August.

The Bank of England, however, is approaching these reductions with caution. While lower rates can stimulate growth, the Bank has emphasized that they are not looking to start a rapid rate-cutting cycle. Their goal remains to balance growth with inflation control, and they are expected to adjust rates with an eye toward maintaining low and stable inflation in the long term.

Considerations for the Future

While these rate reductions are intended to aid economic recovery, it’s crucial to watch how inflation, consumer behaviour, and business investments respond. If inflation remains under control, further adjustments may be made, but the Bank of England has indicated that any future moves will be approached carefully.

In summary, the recent reduction of interest rates to 4.75% will likely provide relief for borrowers and some renewed energy in the housing market, but at the cost of reduced savings returns. The broader impact on the economy will depend on how these shifts in borrowing and spending behaviour influence growth and inflation.

In an attempt to popularise the use of its app, HMRC is launching a new advertising campaign aimed in particular at 18 to 34 year olds.

More than 1.7 million people are already using the HMRC app every month, which enables users to access services such as making a Child Benefit claim, finding their National Insurance number and a tax calculator to estimate their take-home pay.

Between July and September 2024, 711,382 new users downloaded the app, and there was a 39% increase in app activity compared to the same period last year – up from 20.93 million sessions to 29.22 million. And nearly £300 million has been paid to HMRC via the app so far this financial year.

The most popular features used on the app between July and September this year were:

• check State Pension contributions- 1.9 million sessions
• manage Child Benefit – 1.6 million sessions
• view annual tax summaries – 1.4 million sessions

 

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

“One of the main priorities for HMRC is improving its customer services and this incredibly useful and user-friendly app is a great example of how tax can be made much easier for people.

 

“Whether you’re a student looking for your National Insurance number or a new parent wanting to claim Child Benefit, the HMRC app has a range of tools for you, at your fingertips. I urge everyone to download it today.”

 

The HMRC app is rated 4.7/5 and 4.8/5 respectively on the Google Play and Apple Store and ranks among both of their top 10 finance apps.

Unfortunately, ignorance of your tax affairs, how much tax you owe, when you should pay and so on, is no excuse for non-compliance and this app does offer all taxpayers quick access to check their current tax position on most basic tax issues.

Take a look. You can download the HMRC app from the Apple Store or Google Play. 

The upcoming increase in employer National Insurance Contributions (NICs) in the UK, set to rise from 13.8% to 15% from 6 April 2025, along with the reduction of the secondary threshold from £9,100 to £5,000, will significantly impact business costs. 

To mitigate these effects, employers can consider the following strategies:

1. Use the Enhanced Employment Allowance

The Employment Allowance, which offsets employer NIC liabilities, will increase from £5,000 to £10,500 per year starting April 2025. 

This enhancement allows eligible employers to reduce their NIC bill, effectively neutralising the impact of the rate increase for many small businesses.

2. Implement Salary Sacrifice Schemes

Salary sacrifice arrangements enable employees to exchange a portion of their salary for non-cash benefits, such as pension contributions or childcare vouchers. This reduces the gross salary on which NICs are calculated, lowering both employer and employee NIC liabilities. However, it’s essential to ensure that such schemes comply with current tax regulations and do not adversely affect employees’ entitlements.

3. Review Workforce Structure

Assessing the composition of the workforce can identify opportunities for cost savings. Employers might consider flexible working arrangements, part-time roles, or outsourcing certain functions to manage NIC liabilities more effectively. However, it’s crucial to balance these changes with operational needs and employee morale.

4. Invest in Training and Development

Enhancing employee skills can lead to increased productivity, allowing businesses to achieve more with the same or fewer resources. This approach can offset the additional costs incurred from higher NIC rates by improving overall efficiency and output.

5. Explore Tax-Efficient Benefits

Offering benefits that are exempt from NICs, such as certain health and wellbeing programs, can provide value to employees without increasing NIC liabilities. Also, reviewing the types of company cars offered to employees and removing vehicles with high emissions could help reduce Employers’ NIC payable on overall car benefits provided. 

6. Plan for Future Budgeting

Incorporating the anticipated NIC increases into financial planning allows businesses to adjust budgets accordingly. This proactive approach ensures that the additional costs are accounted for, reducing the likelihood of financial strain when the changes take effect.

We can help

We can provide tailored strategies to manage NIC liabilities effectively. Please call if you are concerned about the effects of this increase on your business performance.

The proposed increases to the UK National Minimum Wage (NMW) and National Living Wage (NLW) set for April 2025 are expected to impact employers and employees significantly. Here’s how various sectors might feel these changes:

 

1. Financial Pressures on Employers: With the NLW expected to rise to approximately £12.21 for those over 21, and NMW rates for younger employees also set to increase, businesses across the UK, particularly in sectors like retail and hospitality, face substantial cost increases. It’s estimated that these changes will add around £3 billion to labour costs, with smaller businesses that operate on tight margins potentially feeling the strain the most. According to the Low Pay Commission, this increase will require employers to adjust wages further up the pay scale to maintain differentials between roles, all of which adds pressure to wage budgets.
2. Benefits for Low-Wage Workers: The wage boost is expected to positively impact approximately three million employees, helping lift earnings closer to the “real living wage” and offering support amid rising living costs. This uplift aligns with the Labour government’s goal to tie the NLW to two-thirds of median wages, aiming to improve income equality across the workforce. As reward consultant Duncan Brown noted, while wage increases alone might not solve all the issues affecting low-wage earners, they play a crucial role in addressing in-work poverty.
3. Productivity and Workforce Planning: While the wage hikes aim to support employees, businesses may need to adopt productivity-boosting measures to counterbalance the higher costs. Charles Cotton of CIPD advised that companies consider smarter working methods rather than relying on passing the increased costs onto consumers, which may not be sustainable long-term. Investment in workforce training and upskilling is one potential strategy, which could help companies get more value from their labour costs and better retain talent amidst competitive wage increases.
4. Social and Policy Context: Experts like Tony Dobbins from the University of Birmingham highlight the importance of integrating wage increases within a broader social policy framework, suggesting that additional support for essentials such as housing and utilities is necessary to fully address in-work poverty. The idea of a “social wage” goes beyond basic wage increases, advocating for a more comprehensive support structure to alleviate financial stress for lower-income workers and create a more sustainable living wage environment.

.

In summary, the planned April 2025 wage increases are set to offer substantial support to lower-paid workers, although they present real challenges for businesses in managing costs and maintaining wage structures. Employers may need to focus on productivity improvements and training investments to balance these increases in a way that supports both staff and operational sustainability.

New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.

Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.

The statutory Code of Practice provides businesses with advice on how tips should be distributed among staff. The Code of Practice is statutory and has legal effect, meaning it can be introduced as evidence in an employment tribunal.

The government has unveiled new measures to support small businesses and the self-employed by tackling the scourge of late payments, which according to the Smart Data Foundry is costing SMEs £22,000 a year on average and according to FSB research, leads to 50,000 business closures a year.

The government will consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – helping deliver our mission to grow the economy.

In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.

Enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies to report their payment performance twice yearly on GOV.UK.

Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.

The consultation which will be launched in the coming months, will also consider a range of further policy measures that could help address poor payment practices.

Research shows that every quarter in 2022, 52% of SMEs small firms in the UK suffer from late payments, meaning roughly 2.8 million small firms face this issue, with the Federation of Small Businesses describing it as one of the biggest problems facing SMEs.

Late payments are just one element of the problem, with some SMEs forced to wait months for contracts to be fulfilled and some are even forced to take out loans against their own homes to manage cash flow.

Cracking down on late payments will unlock growth for 5.5 million small firms by enabling them to invest their time hiring more employees, boosting wages, and exporting around the world, rather than chasing down late payments.

The Business Secretary will hold a joint call with the Federation of Small Businesses later today to outline to SME leaders the work the Department will undertake to put in place tough new laws to end bad payment culture. New proposals, subject to consultation, will be bought forward on audit and audit committees, in order to help rebuild small businesses’ trust that they will be paid on time.

There are specific customs requirements for commercial goods that you take with you to sell abroad. You must declare any goods intended for sale outside the UK, whether they are in your baggage or a private vehicle.

The regulations for commercial goods or samples carried by passengers in their accompanied baggage are known as Merchandise in Baggage (MIB). As of January 2024, the threshold for simplified declarations of MIB increased to £2,500 (increased from £1,500). If your goods fall below this threshold, you can make a simple online declaration within five days before your departure.

A full export declaration is necessary if the goods exceed £2,500 in value or if they are subject to excise duty or import/export restrictions.

For Northern Ireland, different rules apply. If you are taking commercial goods from Northern Ireland to Great Britain or the EU in your accompanied baggage, no declaration is required.

There are separate procedures for temporarily taking goods abroad (such as samples for a trade fair) or when using a courier or freight forwarder.

Insurance companies have united to step up efforts to crack down on fraudsters seeking to manipulate the UK insurance market with bogus claims and duping innocent people into buying fake insurance policies.

In 2023 alone, 84,400 fraudulent claims worth £1.1 billion were detected by the Association of British Insurers (ABI), a 16% increase in the number of detected claims compared to the previous year. 

Crash for cash scams are becoming a significant issue. This sees fraudsters recklessly orchestrate accidents to put forward an insurance claim, putting innocent lives at risk. Fraudsters may also make claims for accidents that never happened.

The Insurance Fraud Bureau is currently investigating over 6,000 suspected fraudulent motor insurance claims, which could be linked to crash for cash scams. In total, this is estimated to be worth over £70 million in potential fraud.

The new voluntary charter is designed to identify loopholes in the insurance market, enhance collaboration and criminal justice outcomes, better understand the scale of the problem and improve victim support.

Pledges include:

• the National Crime Agency’s National Assessment Centre conducting a review into the role of professional enablers in the insurance sector – where someone provides false evidence to support a bogus insurance claim;
• identifying policies being exploited by ‘illegal insurance intermediaries’ – someone pretending to be a broker or selling completely fake insurance to customers;
• strengthening data security measures to stop insurance fraudsters using customer details to target people; and
• reviewing the tactics and websites being used by fraudsters to promote bogus insurance offers – this includes looking at the vulnerable victims’ notifications process, which has proven successful in the banking sector, to better identify and support victims of insurance fraud.

1 November 2024 – Due date for Corporation Tax due for the year ended 31 January 2024.

19 November 2024 – PAYE and NIC deductions due for month ended 5 November 2024. (If you pay your tax electronically the due date is 22 November 20244.)

19 November 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 November 20244. 

19 November 2024 – CIS tax deducted for the month ended 5 November 2024 is payable by today.

1 December 2024 – Due date for Corporation Tax payable for the year ended 28 February 2024.

19 December 2024 – PAYE and NIC deductions due for month ended 5 December 2024. (If you pay your tax electronically the due date is 22 December 2024).

19 December 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2024. 

19 December 2024 – CIS tax deducted for the month ended 5 December 2024 is payable by today.

30 December 2024 – Deadline for filing 2023-24 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2025-26.

The long awaited, much anticipated and dreaded first Budget of the new Labour government was delivered to Parliament today – 30 October 2024 – by the Chancellor, Rachel Reeves.

We now know where the funds will come from to finance investment and growth, and the vaunted tax increases are no longer speculative, we have the detail. 

 

The impact of the proposed £40bn of tax increases are summarised below.

 

What we knew before the Budget announcements

The following announcements were made before the Budget:

 

National Living Wage (NLW): 

The NLW, which applies to workers aged 21 and over, is set to increase to £12.21 per hour from April 2025, marking a rise from its current rate of £11.44. 

 

National Minimum Wage (NMW): 

Rates for 18 to 20 year olds will increase from £8.60 to £10 per hour. The increase in the 18-20 year old rate narrows the gap between that and the NLW, in anticipation of the adult rate being extended to 18 – 20 year olds in future years.

 

Non-Dom Tax Rules: 

New restrictions on non-domiciled tax statuses are set to tighten. These changes, taking effect in April 2025, will limit non-domiciled tax benefits to an initial four years of UK residency for those previously non-resident, potentially broadening the tax base.

 

From 6 April 2025, the government will introduce a new residence-based system for Inheritance Tax and scrap the planned 50% reduction in foreign income subject to tax in the first year of the new regime.

 

For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 on a disposal where certain conditions are met. Overseas Workday Relief will be retained and reformed, extending to a 4 year period and removing the need to keep the income offshore.

 

The amount claimed annually will be limited to the lower of £300,000 or 30% of the employee’s net employment income. 

 

The government is extending the Temporary Repatriation Facility to 3 years, expanding the scope to offshore structures, and simplifying the mixed fund rules to encourage individuals to spend and invest their FIG in the UK. 

 

VAT on Private School Fees: 

Starting January 2025, private school fees will be subject to 20% VAT. Alongside the removal of charitable rates relief on private schools these moves will increase operational costs for these institutions.

 

Abolition of Furnished Holiday Lettings Tax Regime: 

From April 2025, the tax benefits associated with Furnished Holiday Lettings (FHL) will end, potentially affecting property owners reliant on this tax relief.

 

Income and gains from a FHL will form part of the person’s UK or overseas property business. These changes will take effect on or after 6 April 2025 for Income Tax and Capital Gains Tax and from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains. 

 

Other Budget Personal finance changes

 

Income Tax

There are no changes in the rates of Income Tax and the thresholds at which the higher (40%) and additional (45%) rates apply. As we have commented before, the freezing of the thresholds means that increases in earnings to compensate for inflation will “drag” individuals into tax or the higher rates of tax.

 

As an acknowledgement of this fiscal-drag effect, The Chancellor has committed to restoring the inflation-proofing of the Income Tax thresholds from April 2028.

 

High Income Child Benefit Charge

The government will not proceed with the reform to base the High Income Child Benefit Charge (HICBC) on household incomes. To make it easier for all taxpayers to get their HICBC right, the government will allow employed individuals to report Child Benefit payments through their tax code from 2025 and pre-prepopulate self-assessment tax returns with Child Benefit data for those not using this service.

 

Starting rate for savings

The government will introduce legislation in Finance Bill 2024-25 to retain the 0% band for the starting rate for savings income at its current value of £5,000 for tax year 2025 to 2026. This measure will apply to the whole of the UK. 

 

National Insurance rates and thresholds

The September Consumer Prices Index (CPI) figure of 1.7% will be used as the basis for uprating the Class 2 and Class 3 National Insurance contributions for the tax year 2025-26. The Class 1 Lower Earnings Limit and Class 2 Small Profits Threshold will also be uprated by September CPI for the 2025-26 tax year.

 

 

Inheritance Tax

The Inheritance Tax nil-rate bands are already set at current levels until 5 April 2028, and the government will introduce legislation in Finance Bill 2024-25 to fix these levels for a further 2 years until 5 April 2030. 

The:

• nil-rate band will continue at £325,000
• residence nil-rate band will continue at £175,000
• residence nil-rate band taper will continue to start at £2 million

 

Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.

 

Unused pension funds and death benefits payable from a pension will be brought into a person’s estate for Inheritance Tax purposes from 6 April 2027.

 

Agricultural Property Relief and Business Property Relief

The government will reform these reliefs from 6 April 2026. The existing 100% rates of relief will continue for the first £1 million of combined agricultural and business property.

 

The rate of relief will be 50% thereafter, and in all circumstances for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM.

 

 

Capital Gains Tax (CGT)

It was speculated that CGT gains would be taxed at Income Tax Rates, thankfully, that did not come to pass.

 

But there are increases, and they will apply to gains on disposals of chargeable assets made on or after 30 October 2024 (Budget Day). The main rates of CGT will change from the previous 10% and 20%, to 18% and 24%, respectively.

 

The 18% rate will apply to gains that fall to be taxed in the Income Tax basic rate band the 24% rate to gains that fall to be taxed in the higher rate bands.

 

The rate of CGT for Business Asset Disposal Relief (BADR) and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026. The £1m limit for BADR remains unchanged.

 

The Investors’ Relief lifetime limit will be reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. 

 

No changes will be made to the 18% and 24% rates of Capital Gains Tax that apply to residential property gains.  

 

Making Tax Digital for Income Tax and Self-Assessment

Making Tax Digital (MTD) for Income Tax will be extended to sole traders and landlords with income over £20,000 by the end of this Parliament. The precise timing of this will be set out at a future fiscal event. This expands the rollout of MTD for Income Tax, which will begin from:

• April 2026 for sole traders and landlords with income over £50,000
• April 2027 for those with income over £30,000

 

Help to Save Scheme

The scheme will be extended for two years from April 2025. Accordingly, the last date a scheme can be opened is 5 April 2027. 

 

From 6 April 2025, the eligibility of the scheme will be extended to all individuals in receipt of Universal Credit earning £1 or more. 

 

ISA, Junior ISA, Lifetime ISA and Child Trust Funds

The annual subscription limits are unchanged at:

• ISAs will remain unchanged at £20,000 until April 2030
• Junior ISAs will remain unchanged at £9,000 until April 2030
• Lifetime ISAs will remain unchanged at £4,000 until April 2030
• Child Trust Funds will remain unchanged at £9,000 until April 2030

These measures will apply to the whole of the UK.

 

Carried Interest

Carried interest is typically paid to fund managers when an investment fund’s returns exceed a specified threshold, often after the fund liquidates assets and distributes returns to investors. Payment occurs after investors recover their initial investment and a preferred return, aligning the manager’s compensation with the fund’s performance.

 

From April 2026, the tax regime for carried interest will be within the Income Tax framework, with a 72.5% multiplier applied to qualifying carried interest that is brought into charge. As an interim step, the government will introduce legislation in Finance Bill 2024-25 to increase the 2 Capital Gains Tax rates for carried interest to 32% from 6 April 2025. 

 

Stamp Duty Land Tax

The government will introduce legislation in the Finance Bill 2024-25 to increase the higher rates of Stamp Duty Land Tax (SDLT), payable by purchasers of additional dwellings and by companies, from 3% to 5% above the standard residential rates. The government will also increase the single rate of SDLT payable by companies and non-natural persons acquiring dwellings for more than £500,000, from 15% to 17%. 

 

The changes will apply to transactions with an effective date on or after 31 October 2024.

 

Fuel Duty rates

The 5 pence cut in the rates of Fuel Duty, first introduced at Spring Statement 2022, will be extended to 22 March 2026. This will maintain the cut for a further 12 months in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical. 

 

Air Passenger Duty (APD) rates for 2025-26 and 2026-27

The reduced rates for economy passengers will increase in line with RPI, rounded to the nearest pound. This means that domestic and international short-haul economy rates will remain unchanged from 2024-25. The standard and higher rates will be further increased to help account for recent high inflation.

 

For 2026-27, all rates will be increased by 13%, rounded to the nearest pound, to account in part for previous high inflation and to help maintain the value of APD rates in real terms. The higher rates that apply to larger private jets will increase by a further 50%. The new rates will apply from 1 April 2026. 

 

Tobacco Duty rates

The duty rates for all tobacco products will increase by the tobacco duty escalator of 2% above inflation (based on the Retail Price Index (RPI)).

 

The rate for hand-rolling tobacco will increase by an additional 10% above the escalator, to 12% above RPI.

 

The changes took effect at 6pm on 30 October 2024.

 

Alongside the introduction of a vaping products duty (see below) there will be an equivalent increase in tobacco duties. The government will make a one-off tobacco duty increase of £2.20 per 100 cigarettes or 50 grams of tobacco, effective from 1 October 2026.

 

 

Vaping products duty (VPD)

The government will introduce legislation in a future Finance Bill for a single duty rate of £2.20 per 10ml of vaping liquid. The measure will take effect from 1 October 2026, with businesses able to apply for approval from 1 April 2026. 

 

Alcohol Duty Uprating

In a welcome move, the alcohol duty rate on draught products is to be reduced. It is expected that this will reduce the price of an average strength pint by 1p per pint.

 

The government will also increase the discount provided to small producers for non-draught products and maintain the cash discount provided to small producers for draught products, increasing the relative value of Small Producer Relief. 

 

Alcohol duty rates on non-draught products will increase in line with RPI inflation from 1 February 2025.

 

 

Budget impact on UK businesses

 

Corporation Tax charge and rate

There are no proposed changes to Corporation Tax rates, a welcome announcement for SMEs.

 

The government will introduce legislation in Finance Bill 2024-25 to set the charge for Corporation Tax and thereby maintain the main rate at 25% and the small profits rate at 19%.

 

Employers’ National Insurance Contributions

One of the predicted tax increases was to Employers’ National Insurance. These are termed secondary contributions in the legislation. The prediction has proved to be correct.

 

From 6 April 2025 until 5 April 2028, the threshold at which Employers’ contributions will apply is being reduced from £9,100 to £5,000. In future years, this threshold will increase in line with the Consumer Price Index.

 

The main rate of employer’s secondary rate (Class 1) NIC will increase by 1.2% from 13.8% to 15%. Class 1A contributions (that apply to benefits in kind) and Class 1B contributions will increase by the same amount.

 

Thankfully, the government has listened to the various business lobby groups on behalf of smaller businesses and will also introduce legislation to increase the Employment Allowance from £5,000 to £10,500 and remove the restriction that currently applies to the Employment Allowance, where only employers who have incurred a secondary Class 1 National Insurance contributions liability of less than £100,000 in the tax year prior are able to claim.

 

This will take effect from April 2025 and will mean eligible employers will be able to reduce their National Insurance contributions liabilities by up to £10,500 per year. 

 

Tax treatment of double cab pick-up vehicles

The government will not introduce legislation to maintain the treatment of double cab pick-up vehicles with a payload of one tonne or more as goods vehicles.

 

HMRC is in the process of updating its guidance to clarify the position in respect of such vehicles which will be treated as cars for capital allowances, for benefits in kind and for some deductions from business profits. Transitional arrangements will also apply.

 

Energy Profits Levy (EPL) reform 2024

As announced at the July Statement 2024, the government will introduce legislation in Finance Bill 2024-25 to provide for changes to the Energy Profits Levy (EPL). The legislation will increase the rate of the levy by 3% to 38% and the sunset clause will be extended to 31 March 2030. The legislation will remove the 29% investment allowance, and the rate of the decarbonisation allowance will be set at 66% to broadly maintain the cumulative value of relief for decarbonisation expenditure. These changes will take effect from 1 November 2024.

 

Taxation of employee ownership

The taxation of Employee Ownership Trusts and Employee Benefit Trusts is to be reformed. These reforms will ensure that the regimes remain focused on encouraging employee ownership and rewarding employees, and to prevent opportunities for abuse. The changes will take effect from 30 October 2024. 

 

Close company shareholders – anti avoidance measure

The government will introduce new legislation to prevent avoidance of the section 455 Corporation Tax Act 2010 (Loans to Participators) charge, by ensuring that the Targeted Anti-Avoidance Rule (TAAR) remains robust and effective.

 

The change repeals the relief for return payments where the TAAR has applied and moves the related legislation together for clarity. 

 

The changes will take effect from 30 October 2024 and specifically will apply to return payments made on or after that date. 

 

Capital allowances for zero emission cars and electric vehicle charging points

The 100% first-year allowances for zero-emission cars and electric vehicle charge-points is extended until 31 March 2026 for Corporation Tax, and to 5 April 2026 for Income Tax.

 

Additional tax relief for visual effects (VFX)

Film and high-end TV companies will be able to claim an enhanced 39% rate of Audio-Visual Expenditure Credit (AVEC) on their UK visual effects (VFX) costs. UK VFX costs will be exempt from the AVEC’s 80% cap on qualifying expenditure. 

 

The changes will take effect from 1 April 2025, for expenditure incurred on or after 1 January 2025.

 

Taxation of company cars

The appropriate percentages for zero emission and electric vehicles will increase by 2% per year in 2028-29 and 2029-30, rising to an appropriate percentage of 9% in tax year 2029-30.  

 

Appropriate percentages for all cars with emissions of 1 to 50g of CO2 per kilometre, including hybrid vehicles, will rise to 18% in tax year 2028-29 and 19% in tax year 2029-30.

 

Appropriate percentages for all other vehicle bands will increase by 1% per year in tax years 2028-29 and 2029-30. This will be to a maximum appropriate percentage of 38% for tax year 2028-29 and 39% for tax year 2029-30.

 

Annual uprating of the van benefit charge and the car and van fuel benefit charges 2025-26

These rates will be increasing using the September 2024 Consumer Prices Index (CPI). 

 

The following new rates will come into effect from 6 April 2025:

• the van benefit charge will be £4,020 in tax year 2025-26
• the van fuel benefit charge will be £769 in tax year 2025-26
• the car fuel benefit charge multiplier will be £28,200 in tax year 2025-26

 

The government will introduce legislation by statutory instrument in December 2024 to ensure the changes are reflected in tax codes for tax year 2025-26.

 

Reporting Benefits in kind by payroll software

A technical note has been published which provides further clarification on plans for mandatory payroll reporting. The technical note confirms that, from April 2026, it will be mandatory to payroll all benefits in kind, except for employment related loans and accommodation. Payrolling for these two benefits will be introduced on a voluntary basis from April 2026 and the government will set out the next steps on when they will be mandated in due course.

 

 

OUR SUMMARY

Although some of the expected dire increases in tax proposed in the media since the general election, have not come to pass, there is still a lot to be considered.

 

If you have concerns about any of the points summarised above, please call. In particular, do not act based on this update without first consulting with your professional advisors.