Taxing times: Budget 2024 unveiled
Today, Chancellor Rachel Reeves presented Labour’s long-awaited budget, with some of the content already having been announced in the lead up and with the overall aim to address and stabilise the public finances with tax rises of approximately £40 billion. The key announcements of today’s budget include:
- Non-compliance in the umbrella company market:
To address what the government refers to as widespread tax avoidance and fraud within the umbrella company sector, the government has announced that, starting in April 2026, agencies will be legally responsible for ensuring PAYE is correctly operated on payments made to workers via umbrella companies. In instances where no agency is involved, this responsibility will shift to the end client. The government will set out full details of how this measure will operate in the coming months, alongside draft legislation ahead of its introduction to Parliament as part of the Finance Bill 2025. Further policy detail can be found here.
The policy paper is light on detail, as you would expect given its nature, but it does provide insight on the general direction of travel. Despite the lack of detail, we’ll have more on what detail there is, in our newsletter on Friday.
- Tackling non-compliance:
In early 2025, the government plans to launch a consultation to explore ways to strengthen HMRC’s powers and sanctions, enabling quicker action against tax advisors who support non-compliant practices.
The government has pledged to address offshore non-compliance as part of its goal to reduce the tax gap. This commitment includes increasing resources and expanding compliance efforts to target significant offshore non-compliance issues, including fraud involving high-net-worth individuals, intermediaries, corporate control structures, and other connected entities.
The government is publishing a consultation on reforming HMRC’s correction powers, exploring changes to HMRC’s existing powers and processes, and a potential new power to require taxpayers to correct mistakes themselves.
- National Minimum Wage (NMW) and National Living Wage (NLW) Rates:
As announced yesterday and confirmed by the chancellor today the rates that will apply
From 1 April 2025 are as follows:-
- National Living Wage (21 & over) – from £11.44 currently to £12.21 per hour
- 18-20 Year Old Rate – from £8.60 currently to £10.00 per hour
- 16-17 Year Old Rate – from £6.40 currently to £7.55 per hour
- Apprentice Rate – from £6.40 currently to £7.55 per hour
- Changes to National Insurance Contributions (NICs):
From 6 April 2025, Employer’s NICs will rise from 13.8% to 15%, adding an estimated £25 billion per year to government revenue. The per-employee threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year.
- Employment Allowance:
The government is increasing the Employment Allowance from £5,000 to £10,500 and removing the £100,000 threshold, expanding this to all eligible employers.
- Personal Allowances:
The government will not extend the freeze to income tax and National Insurance contributions thresholds and from April 2028, these personal tax thresholds will be uprated in line with inflation.
- Appointment of a Covid Corruption Commissioner:
The government has announced plans to shortly appoint a Covid Corruption Commissioner, who will soon lead efforts to recover public funds from companies that exploited government-led schemes during the COVID-19 pandemic.
- Increasing HMRC’s staff:
As announced in July 2024, the government will recruit an additional 5,000 HMRC compliance staff.
- Benefits in Kind reporting:
The government confirmed that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2026. This will apply to income tax and Class 1A NICs.
- Business Asset Disposal Relief (BADR) & Capital Gains Tax (CGT):
There will be an increase to the lower rate of CGT from 10% to 18% and the higher rate from 20% to 24%. CGT rates for Business Asset Disposal Relief and Investors’ Relief will rise gradually to 14% from 6 April 2025 and match the main lower rate of 18% from 6 April 2026.
- Corporate tax roadmap:
The government has released a Corporate Tax Roadmap that commits to capping the Corporation Tax Rate at 25%. It also includes the maintenance of the Small Profits Rate and marginal relief at current rates and thresholds; and maintains key features such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box. For more information, please refer to the details provided here.
- Increasing HMRC’s interest rates:
From 6 April 2025, the government will increase the late payment interest rate charged by HMRC on unpaid tax liabilities by 1.5 percentage points.
If you have any questions, contact us, for more details.
