The Chancellor of the Exchequer (Rachel Reeves) delivered her first budget to the UK Parliament on 30 October 2024. The budget contains measures to increase spending on public services by about £70 billion over the next five years. Spending commitments will be paid for using a combination of increased tax revenues and borrowing and means the amount of tax paid by businesses and individuals will increase across a range of areas.
While accountants have been working hard to support clients most affected by the tax increases announced in the budget, as businesses themselves, they will need to calculate the impact of additional employment costs on their own profit margins and act accordingly. To remain competitive, many UK accountants are looking to outsource work, securing immediate reductions in costs, and accessing a ready-made pool of resources.
Summary of budget announcements
The largest amount of tax will be raised through the 1.2% increase in National Insurance paid by Employers. The rate paid by employers increases to 15%, with changes made to the Employment Allowance to help smaller businesses manage the increased liabilities.
In England and Wales, no changes were made to the level of income tax or national insurance paid by employees and the thresholds for the basic rate and higher rate of income tax remain unchanged until 2028. The Scottish Government announced increases to the thresholds for the Starter and Basic rates of income tax from April 2025.
The amount of Capital Gains Tax paid on disposal of assets will increase for lower rate and higher rate taxpayers to 18% and 24% respectively. More revenue will be raised from Inheritance Tax and unspent pension pots will now be included in estates.
With immediate effect, the amount of stamp duty paid on additional dwellings increases to 5% in England and Wales. The Scottish government increased the level of stamp duty to be paid on additional dwellings from 5 December 2024.
No changes were made to corporation tax rates which remain capped at 25% for businesses with profits over £250,000. The government has said the rates of corporation tax paid and tax reliefs available to businesses will remain in place for the next five years.
Detailed announcements
National Insurance paid by Employers increases to 15% (from 13.8%)
The Chancellor announced the amount of National Insurance paid by employers will increase from the current rate of 13.8% to a new rate of 15% from 6 April 2025. The rates of national insurance paid by employees and the self-employed remain unchanged. The threshold at which employers start to pay National Insurance will reduce from £9,100 to £5,000 per employee. This will affect Directors of micro and small sized companies taking a tax efficient salary.
Small businesses entitled to the Employment Allowance (the amount where businesses start to pay National Insurance) will see the allowance increase from £5,000 to £10,500. The allowance is available to any eligible employer following the removal of the £100,000 limit on national insurance liabilities.
Capital Gains Tax
Capital Gains Tax (CGT) must be paid when valuable assets are sold. A threshold of £3,000 applies before any tax is due. The Chancellor announced the lower rate of CGT (paid by basic rate taxpayers) will increase from 10% to 18% and that the higher rate of CGT (paid by higher rate taxpayers) will increase from 20% to 24%. The new rates apply from April 2025.
CGT rates for Business Asset Disposal Relief and Investor’s Relief will increase to 14% from 6 April 2025 and then increase to 18% from 6 April 2026.
Inheritance Tax
The first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants. For couples the thresholds are £650,000 and £1 million respectively. The tax free allowance on an estate passed to a surviving spouse or civil partner remains at £1 million. These thresholds will be frozen until 2030 and have not changed since 2009.
Inherited pensions and death benefits payable from a pension will now be included in the overall value of an estate from 6 April 2027 following the removal of their tax-free status.
Stamp Duty
No changes were made to the amount of stamp duty paid by first time buyers or for a main dwelling. The Higher Rates for Additional Dwellings increase from 3% to 5% from 31 October 2024, for those buying second homes or landlords purchasing buy to let residential properties (including residential property companies).
Stamp Duty on second homes and additional properties in Scotland, known as the ‘Additional Dwelling Supplement’ is increasing from 5 December 2024, as shown below.
| Purchase price |
Main residence rate |
Old rate second home or additional property |
New rate second home or additional property |
|---|---|---|---|
| Up to £145,000 | 0% | 6% | 8% |
| Up to £175,000 for first-time buyers | 0% | 6% | 8% |
| £145,001 to £250,000 | 2% | 8% | 10% |
| £250,001 to £325,000 | 5% | 11% | 13% |
| £325,001 to £750,000 | 10% | 16% | 18% |
| Over £750,001 | 12% | 18% | 20% |
National Living Wage and National Minimum Wage
The National Living Wage for people aged over 21 years will increase by 6.7% to £12.21 per hour from April 2025. At the same time, the National Minimum Wage will rise for people aged between 18 years and 20 years old, which will increase by 16.3% to £10 per hour.
Business rates relief
The amount of relief on business rates will reduce from 75% to 40% from April 2025.
Fuel Duty
No changes were made to the amount of fuel duty and the 5p per litre reduction remains in place.
Private school fees
From January 2025, VAT will be charged on private school fees. Private schools will no longer be entitled to charitable business rates relief from April 2025.
Non-domiciled regime abolished
The non-domiciled tax regime has been abolished and will be replaced by a new residency based system from 6 April 2025.
Scottish income tax thresholds (announce 5 December 2024)
The Scottish government announced changes to the Starter, Basic and Intermediate rate thresholds for income tax for the 2025/26 tax year (changes shown in bold text):
| Income tax bands and rates | 2024/25 earnings thresholds | 2025/26 earnings thresholds |
|---|---|---|
| Personal allowance | £0 to £12,570 | £0 to £12,570 |
| Starter (19%) | £12,571 to £14,876 | £12,571 to £15,397 |
| Basic (20%) | £14,877 to £26,561 | £15,398 to £27,491 |
| Intermediate (21%) | £26,562 to £43,662 | £27,492 to £43,662 |
| Higher (42%) | £43,663 to £75,000 | £43,663 to £75,000 |
| Advanced (45%) | £75,001 to £125,140 | £75,001 to £125,140 |
| Top (48%) | Over £125,140 | Over £125,140 |
In Scotland, the personal allowance is reduced by £1 for every £2 earned over £100,000, the same as the rest of the UK.
What does this mean for accountants?
Many accountants will be concerned about the increased costs of employment introduced by the budget and will be looking at ways to reduce costs. Offshoring services provides scope for accountants to reduce costs, improve cash flow and create the additional capacity needed to support clients requiring specialist tax and financial planning services.
Initor Global has been providing offshore personal tax services to UK accountants since 2006. Our outsourced tax, accounting and payroll services are suitable for all client engagements – from sole traders and micro businesses to SMEs and large companies.
We offer a free trial of up to 10 hours of accountant time and promise to turn your trial work around within 72 hours.
If you are an accountant looking to outsource services while increasing margins and helping your clients, you can book a video call with one of Initor Global’s expert advisors using this link or send an email to hello@initor-global.co.uk.
Disclaimer
This blog draws on information published by HMRC and other professional bodies. It is not a complete guide to the 2024 Autumn Budget. Information may be subject to change and Initor Global accepts no responsibility should you decide to rely on the information we have published in this blog. Professional advice should always be taken as necessary based on your individual circumstances.
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