Autumn Budget 2024 – Finance

The UK's Autumn Budget 2024 was delivered on 30 October by the country's first female Chancellor of the Exchequer. Whilst there were few announcements specifically focussed on the finance sector, the Budget was one of the most consequential of recent years. The following contains a summary of the key proposals.

 

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. The bank levy and bank surcharge will also remain unchanged.

 

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

 

Changes to alternative finance arrangements tax rules

The capital gains tax rules will be amended to ensure that where an existing asset is used as a means to raise finance using alternative finance (for example Islamic finance, diminished shared ownership arrangements), the tax outcome is broadly the same as conventional financing. These measures would ensure a level playing field between alternative finance arrangements and traditional financing.

 

Pillar 2 Undertaxed Profits Rule will be introduced and ORIP repealed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.

 

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. 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.

 

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.

 

Reform of the Energy Profits Levy

In support of the transition to clean energy, 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.

 

Reporting obligations for cryptoasset service providers

Draft regulations requiring cryptoasset service providers to comply with reporting and due diligence requirements as part of compliance with the Cryptoasset Reporting Framework have been published. Final regulations are expected to be made in 2025 to come into force on 1 January 2026.

 

Miscellaneous

Finally, the Budget introduced a number of significant personal tax changes:

• With effect for disposals on or after 30 October 2024, the higher rate of Capital Gains Tax will be increased to 24% and the lower rate to 18%, now aligning the rates with those for disposals of residential property (the rates for Income Tax, Employee National Insurance Contributions and VAT will however remain unchanged).
• Abolition of the UK's 'non-dom' regime, and its replacement with a residence-based regime, will take effect from 6 April 2025.
• Changes to Inheritance Tax rules (primarily to reform certain reliefs, and bring unused pension funds and death benefits payable from a pension into a person's estate for IHT purposes from 6 April 2027).

 

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