Ch Ch changes
Chancellor Rachel Reeves delivered Labour’s first Budget since 2010 last month and it was pretty much as expected, given the limited options to raise taxes.
In my pre budget blog last month I asked whether capital gains tax rates would increase mid-year. Well it only went and happened. The rates went up by 8% & 4% for disposals on or after 30 October 2024, to align with residential property capital gains rates of 18% and 24%. I must admit I was expecting worse. Let’s hope HMRC’s software can cope with this.
In addition, there were changes to Employers National Insurance (NI) which pretty much confirmed what everyone thinks that NI is just another tax. The changes are effective from 6 April 2025 and include an increase in the rate from 13.8% to 15% and a reduction in the starting point at which Employers NI is paid from £9,100 to £5,000. The increases were softened by an increase in the NI Employer Allowance from £5,000 to £10,500. However, this is a major cost for businesses and will have a significant impact on all sectors of the economy as we have already seen from various sources.
The Inheritance Tax (IHT) nil rate band of £325000 was frozen until 2030 and the following proposed changes to IHT were also announced:
- Business property relief (BPR) and Agricultural Property Relief (APR) – Only the first £1 million of combined APR and BPR will benefit from 100% relief from IHT. Where the value of assets qualifying for ether relief exceeds £1 million a reduced rate of 50% relief will apply.
- Alternative Investment Market (AIM) shares (and shares designated as “not listed” on the markets of recognized stock exchanges) will no longer be relieved from IHT but a reduced rate of IHT will be applied of 50% relief.
Both the above measures apply from 6th April 2026 and are subject to a technical consultation that will be published in early 2025.
- Unused pension funds and death benefits payable from a pension (inherited pension pots) will be bought into a person’s estate for IHT with effect from 6th April 2027. Pension scheme administrators will become liable for reporting and paying the IHT.
It would be an understatement to say that the proposed changes have not been received well particularly by the farming community. It seems that the Government have missed the target on this issue and it is hoped that there will be a re-think on these proposed changes.
Finally, Donald Trump won the latest never ending US presidential election.