Autumn Budget 2024 – Employment

On 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget 2024 in the context of the much talked about "black hole" in public finances, and with the message that the government were "fixing the foundations" to restore economic stability.

From the outset, the government committed not to increase the basic, higher or additional rates of income tax or the rates of employee and self-employed NIC.

From an employment and pensions tax perspective, the other key announcements were as follows.

 

Increases in the rates of employer NIC

From April 2025, the rate of employer NIC will be increased by 1.2%, going from 13.8% to 15%. In addition, the secondary threshold above which employers start paying employer NIC will be reduced from GBP9,100 to GBP5,000 per year.

The employer NIC employment allowance is being increased from GBP5,000 to GBP10,500, and the current GBP100,000 eligibility threshold is to be removed.

 

Changes to the "non-dom" regime

Non-UK domiciled individuals (“non-doms”) are individuals whose permanent home, or domicile, is outside the UK. Currently, non-doms who are UK resident can benefit from a favourable tax regime, which allows them to opt to use what is known as the remittance basis of taxation.

As opposed to other UK resident individuals who pay UK tax on all their UK and foreign income and gains, in essence, the remittance basis of taxation works such that non-doms can pay UK tax on their UK income and gains, but only pay UK tax on their foreign income and gains when they are "remitted" (brought to) the UK.

It had been announced, by the previous Conservative government in the Spring Budget 2024, that the current regime, and the application of the remittance basis of taxation, was to be abolished from April 2025. The government has announced their intention to proceed with abolition.

A new regime will be introduced for individuals arriving to the UK (and who have been non-UK resident for a period of 10 consecutive years) under which no UK tax will be paid on any eligible foreign income or gains for a period of four years and UK tax will be paid on any foreign income or gains following that first four year period.

Transitional provisions are to be introduced to mitigate the impact of the new regime on existing non-doms who claimed the remittance basis, in particular, the government will introduce:

• An option to rebase the value of certain capital assets to 5 April 2017 levels where certain conditions are met
• A three-year Temporary Repatriation Facility to bring previously accrued foreign income and gains into the UK at a 12% rate of tax (rising to 15% in tax year 2027-28)

 

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 NICs) 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.

 

Employee Ownership Trusts and Employee Benefit Trusts

Following last years' consultation on the taxation of employee ownership trusts and employee benefits trusts, the government is introducing changes to the regimes to ensure that the favourable tax treatment remains available to those who use such trusts for the intended policy purposes, whilst preventing tax advantages being obtained through use outside of these intended purposes.

 

Electric Company Cars

The previously announced BIK rates on fully electric vehicles are to be maintained until tax year 2028–29, however, they will increase by 2% in each of 2028-29 and 2029-30.

 

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