The Chancellor today presented her much-anticipated first budget, which, as expected contained significant tax rises. To summarise briefly:
CAPITAL GAINS TAX
For disposals made on or after 30 October 2024, the lower rate of Capital Gains Tax increases from 10% to 18% and the higher rate from 20% to 24%.
INHERITANCE TAX
100% relief from Inheritance Tax was previously available on both agricultural and business assets. Unquoted stocks and shares were treated as business assets, including shares listed on some of the smaller exchanges (e.g. the Alternative Investment Market or “AIM”). Holding this type of investment has been a standard IHT planning method for many years. From 30 October, however, the rules have been changed:
- The rate of relief on all shares listed on AIM (or similar) is reduced to 50%.
- Otherwise, 100% relief is available only on the first £1m of business & agricultural assets with 50% relief available thereafter. Assets automatically receiving 50% relief (e.g. AIM shares) will not count towards the £1m allowance.
- Unused allowances cannot be transferred between spouses
- The £1m allowance will also apply to trusts, with different rules for those set up before and after 30th October 2024.
Current inheritance tax thresholds are to be frozen until 6 April 2030, so that the nil rate band remains at £325,000 and the residence nil rate band at £175,000
For deaths after 6 April 2027, unspent pensions pots will be subject to IHT.
DOMICILE
From 6 April 2025 the “non-dom” regime will be replaced with a system based on long-term residence:
- anyone who has been tax resident in the UK for 10 of the last 20 years will pay UK tax on their worldwide assets, (with exception for the first 4 years of a new arrival’s tax residence in the UK).
- The residence rules will also apply to IHT, bringing a long-term resident’s non-UK assets within the scope of the tax. .
- The new rules also change the way in which offshore trusts are taxed: tax will be charged in cases where the settlor (and in some circumstances the beneficiaries) are UK resident, even if trust assets are outside the UK and the settlor was non-resident when the trust was established.
STAMP DUTY LAND TAX
Where contracts are exchanged on or after 31 October 2024, the rate of SDLT on second homes and buy to let properties will increase from 3% to 5%.
INDEPENDENT SCHOOLS
- 20% VAT will be charged on independent schools’ fees from 1 January 2025
- Schools will lose their eligibility for charitable rate relief from 1 April 2025
EMPLOYERS & EMPLOYEES
- Employers’ National Insurance contributions will rise to 15% from 6 April 2025.
- The threshold for employers’ National Insurance contributions will also be lowered from £9,100 to £5,000.
- From 6 April 2025, the minimum wage for over 21s will rise from £11.44 to £12.21 per hour and for people aged between 18 and 20-years old from £8.60 to £10 per hour. Apprentice pay will rise from £6.40 to £7.55 per hour.
OTHER DUTIES
- Fuel duties will remain at current levels.
- The duty charged on alcohol sold on draft to be reduced by 1p per pint. Otherwise, alcohol duty will increase in line with inflation.
- Air Passenger Duty will be increased adding approximately £2 to the cost of an economy class ticket
If you have any questions on these budget announcements regarding Inheritance Tax, Capital Gains Tax or Stamp Duty Land Tax, please do get in touch on enquiries@fsmsolicitors.co.uk