Autumn Budget 2024: delivering difficult decisions

In the first Budget delivered by the Labour Party since 2010 (and the first given by a female Chancellor since the role came into existence over 800 years ago), Rachel Reeves announced an extensive array of tax reforms designed to 'stabilise' public finances and facilitate increased government spending.  Altogether, tax rises totalling £40 billion were announced – some expected, others less so.

In our latest podcast Peter Clements, Sarah Bond, Rose Swaffield, Josh Critchlow and Chris Gotch from our London tax team discuss some of the business tax measures they found most noteworthy in the Autumn Budget 2024. Highlights from the podcast discussion are summarised in this blog post.

Headline Budget announcements

Perhaps the most headline-grabbing tax announcement in the Budget was the increase in employer National Insurance contributions by 1.2 per cent from April 2025. This previously trailed measure is forecast to raise an eye-catching £25 billion a year by 2029-30.

A further £2.5 billion a year by 2029-30 is expected to come from reforms to capital gains tax (CGT). The changes in this respect include: (a) an increase in the CGT main rates (bringing them to 18 and 24 per cent, in line with the rates currently applicable to residential property disposals), and (b) reforms to business asset disposal relief (formerly known as entrepreneurs’ relief) and investors' relief. The team discuss these changes in more detail in the podcast, considering in particular the implications of the announced anti-forestalling measures designed to combat planning undertaken in anticipation of these changes.

Corporate Tax Roadmap 2024

As promised in the Labour Party election manifesto, the government published a Corporate Tax Roadmap as part of the Budget. The Roadmap focuses on providing clarity to businesses about what the UK corporate tax regime will look like for the duration of this Parliament, whilst also highlighting the areas in which we may see changes.

As discussed in the podcast, the Roadmap highlights areas of stability in the UK corporate tax code; it is confirmed that the headline rate of corporation tax will be capped at 25 per cent for the duration of the current Parliament, the substantial shareholding exemption will be maintained, core features of the capital allowances regime (including the ‘full expensing’ of qualifying new main rate plant and machinery and the £1 million annual investment allowance) will be retained, and the recently introduced merged R&D expenditure credit scheme will be preserved. 

The Roadmap also addresses various international corporate tax issues, including clarifying the UK’s position regarding the ongoing implementation of the OECD Pillar 2 proposals for a global minimum tax as well as highlighting future consultations on the UK’s transfer pricing rules, building on discussions held under the previous government.

Interestingly, the Roadmap also notes that the government plans on developing on a new process that will give investors in major projects increased advanced certainty about the applicable tax treatment – further details on this proposal are expected via a promised consultation. 

Taxation of carried interest 

There had been a lot of speculation about changes to the UK taxation of carried interest ahead of the Budget, and many will not have been overly surprised by the Chancellor’s announcement that the existing CGT rates applicable to carried interest will be increased to 32 per cent from 6 April 2025.

However, the bigger news in this space is that the government has indicated that it intends to reform the regime more broadly with effect from April 2026. The current proposal is broadly that all carried interest, irrespective of the character of the underlying source, will be taxed at the standard marginal income tax rate and subject to Class 4 NICs. That would amount to an overall effective tax rate of 47 per cent. Fortunately for fund managers, though, the intention is that ‘qualifying carried interest’ will benefit from a partial exemption, reducing this headline figure to around 34 per cent.

The team discuss these carried interest proposals in more detail in the podcast, including the conditions that may need to be satisfied for carried interest to qualify for the lower effective tax rate, their jurisdictional scope and the lack of grandfathering for existing funds.

Closing the tax gap

The Budget also contained a range of measures designed to ‘close the tax gap’ and contribute to raising tax revenues – together these are estimated to raise an additional £6.5 billion per year by 2029-30.

These included the announcement of a couple of targeted anti-avoidance measures with immediate effect, which were seemingly designed to close loopholes exploited by specific tax planning schemes. In addition, from a tax administration perspective, the rate of interest charged on overdue tax payments will be increased to 4 per cent above the Bank of England base rate from 6 April 2025 – bolstering the incentive for taxpayers to pay disputed tax liabilities sooner than they previously might have done. 

In the podcast, the team discuss the impact on businesses of these measures and related announcements aimed at addressing the tax gap, including the hiring of additional HMRC compliance and debt management staff and the better use of data.

Other key tax takeaways

In the podcast, the team also flag other key tax takeaways from the Budget, including:

• the introduction of Pillar Two's undertaxed profits rule (the ‘UTPR’) for accounting periods beginning on/after 31 December 2024, and the related repeal of the offshore receipts in respect of intangible property (or ‘ORIP’) rules; 
• changes in approach to the replacement of the remittance basis of taxation for non-UK domiciled individuals ('non-doms') with a new residence-based regime; 
• the announcement that transactions on the new Private Intermittent Securities and Capital Exchange System (PISCES) will be exempt from UK stamp duty and SDRT; and
• reforms to the Energy Profits Levy, including a 3 per cent increase in the rate and the removal of the investment allowance (other than for decarbonisation spending).

Our Autumn Budget 2024 podcast is available here.