Last week marked a significant moment in history as Rachel Reeves, the UK’s first female Chancellor, presented Labour’s Autumn Budget. With a legacy of 110 Chancellors before her, the first elected in 1559, her appointment is a beacon of progress.
Rachel Reeves began her Budget with an empowering message for all women and girls: “Let there be no ceiling on your ambition, your hopes, and your dreams.” This heartfelt call to action resonates particularly now, as women have achieved remarkable milestones in leadership roles—holding all four great offices of state. Since 2016, the number of female prime ministers has risen from one to three, and Kemi Badenoch’s recent victory over Robert Jenrick for the Conservative leadership means that Kier Starmer will now be facing a capable female leader of the opposition.
However, it’s important to acknowledge the challenges that persist beyond the political sphere. The Gender Pay Gap has increased in recent years, and with Rachel Reeves at the helm, many are looking to her to address how the budget will support women in this ongoing struggle.
Her commitment to “invest, invest, invest” includes plans to expand funding for female entrepreneurs while aiming to tackle the Gender Pay Gap. Key initiatives focus on improving access to childcare, promoting flexible working arrangements, and ensuring that hard work is rewarded.
Yet, as she had warned before the Budget, the path ahead would be a difficult one, due to the £22 billion black hole. This has led to a series of tax increases that are expected to affect individuals and businesses alike.
In light of these announcements, we have provided you with our snapshot on the changes and how they might impact you and those around you.
Below we have summarised the key changes including:
- The freeze on Income Tax thresholds
- Increase in Capital Gains Tax (CGT) rates
- Changes to Business Relief (BR) and Agricultural Relief (AR)
- The taxation of pensions on death
- Freeze on Inheritance Tax (IHT) Nil Rate Bands (NRB) and Resident Nil Rate Bands (RNRB)
- Abolition of the non-dom regime
- Stamp Duty of second properties
- VAT on private school fees
- National Minimum Wage (NMW) and National Living Wage (NLW) increases
- Employer National Insurance Contribution (NIC) changes
Income Tax Thresholds frozen until April 2028
It has been confirmed that Income Tax and employee National Insurance thresholds will remain unchanged at their current levels until April 2028, after which they will increase in line with inflation. As salaries continue to rise over the next three years, this freeze will result in more taxpayers being pushed into higher tax brackets.
Capital Gains Tax (CGT) increases
Effective from 30 October 2024, the main CGT rates have increased. The lower rate will rise from 10% to 18%, while the higher rate will increase from 20% to 24%.
Rachel Reeves has also announced that the lifetime limit for Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will remain at £1 million. These reliefs generally reduce the CGT payable on selling an unincorporated business or shares in an unquoted trading company. The tax rate applied to BADR and IR assets will increase gradually, remaining at 10% up until 5 April 2025, rising to 14% from 6 April 2025, and then to 18% in April 2026.
Business Relief (BR) and Agricultural Property Relief (APR) restricted
Changes BR and APR have also been announced. Currently, assets that qualify for BR or APR can obtain full relief from Inheritance Tax (IHT) at 100%, with no upper limit. However, from April 2026, this will be restricted so that only the first £1 million of combined agricultural and business property will continue to qualify for relief at 100%, and any value in excess of this will only obtain relief at 50% (effectively reducing the main inheritance tax rate from 40% to 20%). This could have a significant impact on some businesses, particularly family businesses, with some families having to sell business assets to fund a tax bill.
In addition, the rate of BR that applies to AIM shares will be reduced from 100% to 50% from April 2026, without the £1 million full exemption.
Taxation of death benefits
Pensions will now form part of the estate for IHT purposes from April 2027. Initial announcements also confirm that IHT and Income Tax could be payable for death after the age of 75. This could create an effective 67% tax charge on pension death benefits. Given these changes, updates to any legacy plans must be thoroughly considered before taking action.
Nil-rate bands continue to be frozen.
More estates will now feel the stealthy creep of IHT under the government’s plans to extend the freeze on the Nil Rate Bands and Residence Nil Rate Bands for a further two years up until 2030. Disregarding the rise, people are already experiencing an increase in the value of their homes, and other assets meaning more families will be dragged into paying tax on their wealth. The changes mean that proper estate planning is now more important than ever before.
Abolition of the non-domicile (‘non-dom’) regime
The Chancellor confirmed the abolition of the non-dom regime from 6 April 2025, replacing it with a new residency-based scheme said to be simpler and with reliefs for ‘temporary visitors’.
Currently, non-UK domiciled individuals can elect into the UK’s remittance basis regime, meaning they only pay tax on foreign income and gains when it is brought into the UK. Most non-UK assets held by non-doms currently also sit outside the scope of the UK Inheritance Tax (IHT). However, their UK income and gains, and UK situs assets, are subject to UK tax. From 6 April 2025, all UK residents will be taxed on the arising basis, i.e. the taxation of their non-UK income and gains will be the same as the usual UK treatment.
A new Foreign Income and Gains (FIG) regime will be available to give individuals a tax exemption for their non-UK income and gains for their first four years of UK tax residence (so long as they have not been UK resident in any of the previous 10 years).
The proposed Temporary Repatriation Facility (TRF), available for those who have previously claimed the Remittance Basis, has survived, and even been extended to cover three years and expanded to include offshore structures. The tax rate for funds brought into the UK under the TRF will be 12% in the first 2 years, increasing to 15% in 2027/28. However, the proposed 50% reduction in foreign income subject to tax in the first year of the new regime has been scrapped.
The existing Overseas Workday Relief concept will be incorporated into the new regime, and extended to four years, albeit with an overall limit on the benefit. Further details are in the Global Mobility section below.
For CGT purposes, remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 (changed from the proposed date of April 2019) on a disposal where certain conditions are met, so only increases in value from that date will be taxed.
For Inheritance Tax (IHT) purposes, from 6 April 2025, an individual’s IHT status will no longer be determined by their domicile status and will, as with income tax, be replaced with a residency-based test to determine whether an individual is a long-term resident for IHT purposes. Non-UK assets held by individuals who have been resident in the UK for at least 10 of the previous 20 years will be within the scope of IHT. The IHT treatment of non-UK assets held in a trust will depend on the settlor’s residence at the time of charge, rather than their status when the asset was put into trust.
For those who have been resident for more than 10 years but then become non-resident, there will be a tail of between 3 and 10 years during which they will continue to have an IHT exposure on their worldwide assets, with the length of this tail depending on how long they were resident in the UK. Once an individual has had 10 consecutive years of non-residence, the test will essentially be reset.
UK assets will continue to be subject to IHT as currently.
Stamp Duty Land Tax on second properties
For individuals who already own a dwelling and are purchasing another dwelling in England or Northern Ireland (other than a main residence replacement), the higher rates for additional dwellings will increase from 3% to 5% above the standard residential rates and will come into effect on or after 31 October.
VAT on private school fees
The Chancellor confirmed that VAT will be introduced on private school education for terms starting on or after 1 January 2025 with VAT due at 20% on charges for both education and boarding services.
There will be VAT recovery available for local authorities and devolved governments which fund places for students with special educational needs that can only be met through a private school. Minor changes were announced to the rules initially proposed, including amendments to definitions and limited carve-outs. However, the overarching decision to apply VAT to private school and boarding fees, and the timeline for implementation, remain unchanged.
National Minimum Wage (NMW) & National Living Wage (NLW).
NMW and NLW will increase from 1 April 2025. For those aged 21 and over a 6.7% increase from £11.44 per hour to £12.21 per hour, meaning an individual working 40 hours a week will now be earning around £25,500 per annum.
For those aged 18 to 20 a 16% increase from £8.60 per hour to £10 per hour, meaning an individual working 40 hours a week will be earning around £21,000 per annum.
For qualifying apprentices an 18% increase from £6.40 per hour to £7.55 per hour, meaning an individual working 40 hours a week will be earning around £16,000 per annum.
National Insurance Contribution (NIC) changes.
There will be a general increase in employer NIC from April 2025. This increase will be 1.2 percentage points, meaning it will rise from 13.8% to 15%, with the Secondary Threshold on employee earnings upon which employer NIC starts being paid reduced from £9,100 to £5,000.
Although this is a more straightforward change than putting employer NIC on employer pension contributions, it does still come with a cost pressure on business, especially when coupled with the NMW increase announced.
From a pure NIC perspective, this will increase NIC costs for the employer by £926 where they are paying an employee £35,000 a year from April 2025.
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