Budget 2024 – The initial thoughts of bennettbrooks Tax Director, Mary Tierney.
Wow, now that was a budget to get our teeth into. Having spent the afternoon reading various budget documents, what then, are my first thoughts?
First turning to the impact of the increase in employers NIC, with an increase from 13.8% to 15% and a lowering of the threshold above which ERs NIC is due to £5,000 per year with effect from 6 April 2025. This is likely to be a substantial extra cost to some companies, and I have concerns here that this may encourage a movement towards the off payroll market. This is fraught with difficulties and the need to comply with very detailed off payroll working rules. There is a considerable risk for a company that treats an individual as a contractor if in a later status enquiry HMRC later determine that he or she was under tax law an employee and this risk increases with higher employers’ NIC rates.
There was so much concern before the budget over what would happen with CGT rates, and the general response from my colleagues and clients is broadly a sigh of relief. In the same way that we all worked very hard to get a number of corporate transactions completed pre budget, with the now known increase in the BADR rate of CGT from next April, from 10% to 14%, potentially increasing the tax bill for a vendor of qualifying shares or assets by £40k and to 18% the following April giving another £40k increase in tax, we will find that the pressure is on to complete transactions prior to 6 April 2025 and 2026.
In the same way I felt this was a budget of cliff edges, especially when it comes to IHT. The reduction in the combined BPR/APR 100% relief to a limit of £1 million from 6 April 2026 is probably the budget announcement that I, as a tax advisor will be engaging with the most. It will impact for example, the elderly client who over a number of years has built up a portfolio of AIM shares worth more than £1 million, which (putting it bluntly) if she dies before 6 April 2026 will not suffer inheritance tax, but if she survives post this date, will suffer IHT at 40% on 50% of the excess over £1 million. It will clearly impact many farms which whilst they may be worth more than £1 million and so on the death of the older generation who own the farm post 6 April 2026, will now generate a potentially substantial IHT liability with no realisable assets out of which to pay it. Whilst we need to think about this and every case will be different, for a number of reasons I expect to see more lifetime gifting and also more family trusts being created as a result. In a different IHT raising measure, we have the inclusion of pension savings which will now be included as part of the “estate” of someone who has died from April 2027 and so be subject to Inheritance Tax. This may lead to the passing down of wealth to the next generation sooner to mitigate the impact of this.
So, plenty to get our teeth into, as ever tax remains complex and understanding your personal exposure and making sure you arrange your affairs in a tax efficient way is more important than ever.
If you’d like to chat through your personal circumstances, please get in touch.
