Autumn Budget 2024 – International

The UK's Autumn Budget 2024, delivered on 30 October by the country's first female Chancellor of the Exchequer, contains a number of announcements that will be of interest to businesses. It was a Budget focused on restoring stability and protecting working people, and contained a number of tax rises designed to support investment in public services.

 

Corporation tax to remain at 25% for life of Parliament

The Chancellor confirmed that corporation tax will remain at 25% for the remainder of the Parliament, which is expected to be until 2029.

 

Corporate Tax Roadmap released

The government has also released a Corporate Tax Roadmap, with the aim of providing a stable and predictable tax environment for businesses in the area of corporation tax. Among the key commitments in the Roadmap are the following:

• Maintain the generous system of permanent full expensing for this Parliament
• Maintain other core features of the UK’s capital allowances (tax depreciation) regime, including the GBP1m Annual Investment Allowance
• Maintain the generosity of the rates for the merged R&D scheme and the Enhanced Support for R&D Intensive SMEs
• Maintain the Patent Box and preserve the UK’s competitive regime for intangible fixed assets
• Further consult on reforms to the UK’s rules on transfer pricing, permanent establishments and Diverted Profits Tax, including the potential removal of UK-to-UK transfer pricing, consult on further changes to transfer pricing legislation, including potentially lowering the thresholds for exemption to bring medium-sized businesses within the scope of the rules, and review the transfer pricing treatment of cost contribution arrangements.
• Monitor international developments with a view to ensuring the UK’s regime remains competitive

 

Pillar 2 Undertaxed Profits Rule will be introduced and ORIP repealed

The government has re-confirmed the introduction of Pillar 2's undertaxed profits rule (UTPR), which will be effective for accounting periods beginning on or after 31 December 2024.

Alongside the introduction of the UTPR, the UK's Offshore Receipts in Respect of Intangible Property (ORIP) rules will be repealed for income arising from the same date.

A series of technical adjustments is also being made to the UK's existing implementation of the Pillar 2 rules.

 

Changes to carried interest regime

As expected, the government will reform the way that carried interest is taxed from April 2026. From this date, a flat tax rate of 34.625% (including national insurance contributions) will apply to carried interest, and the employment-related securities exemption that applies to the income-based carried interest rules will be abolished. There will now be a consultation on additional conditions to benefit from the flat tax rate, which will include a minimum co-invest obligation by managers and a minimum time period to hold carry before being paid out.

However, as an interim step, the two rates of capital gains tax that apply to carried interest will be increased to 32% from 6 April 2025.

 

Increased investment in HMRC (the UK tax authority)

The government plans to recruit an additional 5,000 HMRC compliance staff and 1,800 HMRC debt management staff, as well as undertake a modernisation of systems, which will no doubt lead to an increase in tax investigations and controversy.

 

Increase in employers' national insurance contributions

Employers' national insurance contributions (NICs) will increase to 15% from the existing rate of 13.8%, and there has been a cut in the earnings threshold at which employers' NICs become payable for each employee from GBP9,100 to GBP5,000 per year. Both changes will take effect from 6 April 2025. However, to support small businesses, the employment allowance (which currently gives employers a discount on national insurance bills of GBP100,000 or less) is increased from GBP5,000 to GBP10,500 and the current eligibility threshold will be removed.

 

Reform of the Energy Profits Levy

The government is increasing the Energy Profits Levy, which applies to the profits of oil and gas companies, to 38% from 35% on 1 November 2024, and the levy will now end on 31 March 2030. Moreover, the 29% investment allowance will be removed.

 

Personal tax changes

A number of personal tax changes were also announced, including:

• Abolition of the UK's 'non-dom' regime, and its replacement with a residence-based regime, with effect from 6 April 2025
• Increase in basic and higher main rates of capital gains tax to 18% and 24% respectively with effect for disposals made on or after 30 October 2024
• Increase in the preferential capital gains tax rate for Business Asset Disposal Relief (for lifetime gains of GBP1m) from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026
• Changes to the inheritance tax rules, in particular to business property relief and agricultural property relief from April 2026

 

Real estate tax changes, including the introduction of a new fund vehicle

Several real estate tax changes have also been announced, including:

• Most significantly, the government confirmed that it will proceed with the introduction of the Reserved Investor Fund (Contractual Scheme) (RIF) – a new unauthorised UK funds vehicle to promote investment into UK real estate. Legislation will be introduced before the end of the current tax year. The RIF is intended to fill a gap in the market, introducing a new onshore lower-cost (and unauthorised) alternative to existing fund structures.
• Increase in the Stamp Duty Land Tax (SDLT) payable by purchasers of additional dwellings and by companies, from 3% to 5% above the standard residential rates, with effect from 31 October 2024. The rate payable by companies and non-natural persons acquiring dwellings for more than GBP500,000 will also be increased from 15% to 17% from this date.
• Reduction in the threshold at which SDLT will begin to be paid on residential property purchases (other than for first-time buyers) to GBP125,000 from 1 April 2025 (currently GBP250,000).
• Changes to the business rates regime to benefit businesses operating in the retail, hospitality and leisure sectors, with a consultation on wider reforms to the regime.

 

Should you have any queries on the Autumn Budget, please reach out to your usual UK tax contact or one of the following.