Now the dust has settled on the significant changes announced by Chancellor Rachel Reeves in the UK's 2024 Autumn budget. It’s worth drawing attention to some of those changes that will have the most significant impact on those working in professional practices and financial services.
National insurance
As people businesses, professional practices and financial services firms will be significantly impacted by the increase in the main rate of employer’s NIC from 13.8% to 15% from April 2025. Additionally, the starting point from which employer’s NIC is assessed on earnings will be reduced from £9,100 to £5,000 impacting smaller owner managed businesses where directors’ remuneration is a combination of salary and dividends.
Carried interest taxation
From 6 April 2025 the CGT rate for all carried interest gains will increase to 32%. From 6 April 2026 a specific tax regime for carried interest will be introduced, moving it from the CGT framework to income tax.
Tax changes for non-doms
This budget had several significant changes which will affect non-domiciled individuals in the UK. From April 6, 2025, the remittance basis regime will be abolished and replaced with a residence-based regime. Additionally, the criteria for determining whether non-UK assets are subject to Inheritance Tax (IHT) will change, with ‘long-term residents’ becoming liable for IHT on their worldwide assets after being resident in the UK for at least 10 out of the last 20 tax years.
Unused pension funds and IHT
From April 2027 pension funds and death benefits will be within an individual’s estate and subject to IHT on a taxpayer’s death, removing a tax efficient planning strategy that many will have been looking to utilise.
VAT on school fees
The government has confirmed the removal of the VAT exemption for education and boarding services provided by private schools will go ahead, as planned, from 1 January 2025. Notably, VAT will also apply to pre-payments received by private schools from 29 July 2024, for terms starting on or after 1 January 2025.
If you have any questions about these changes or how the Budget may impact your business, please get in touch. You can read our detailed analysis of all Budget announcements here: https://www.saffery.com/budget/
From January next year, they will no longer be exempt from paying 20% VAT, and the 80% business rate discount will also be removed for independent schools in England that operate as charities. It’s hard to know quite what will happen because there’s no real precedent for such a move in the UK.
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