Autumn Budget 2024: employment and corporate tax updates

Employment taxation

Employer NICs - The rate of employer national insurance contributions (NICs) will increase from 13.8% to 15% from 6 April 2025. The secondary threshold (the amount at which employers start to pay NICs) will be reduced from £9,100 to £5,000 a year from 6 April 2025 until 6 April 2028, and then increased by the consumer price index thereafter.

Employment allowance - The Employment Allowance will increase from £5,000 to £10,500, and the £100,000 employer’s NIC threshold for eligibility will be removed from 6 April 2025 increasing its availability to a larger number of employers.

Umbrella companies - From April 2026, recruitment agencies will be responsible for accounting for PAYE on payments made to workers supplied via umbrella companies. If no agency is involved, this responsibility will fall to the end client business.

Apprenticeship levy - The Government announced a £40 million investment to transform the Apprenticeship Levy into a more flexible Growth and skills levy.

Employers will have to carry the burden of these proposed changes which could result in reduced recruitment, lower salary increases for existing employees and lower employer contributions to employee pension schemes. There could be an upside to these changes, particularly if employers look to incentivise their staff using non-cash benefits such as approved and unapproved share options.

Corporate tax roadmap

1. Corporation tax rate

1. The headline rate of corporation tax remains at 25% but there will be ongoing monitoring of international developments to ensure that the UK’s regime remains competitive to attract investment and growth.
2. The small profits rate and marginal relief will remain at their current rates and thresholds

2. Capital allowances

1.  The permanent full expensing allowance, the £1 million annual investment allowance, writing down allowances of 18% and the structures and building allowances were all retained.
2. There will be some changes on the definitions and clarity as to the qualifications for capital allowances with an aim to simply the legislation and the tax treatment for predevelopment costs.
3. There will be further exploration of an extension of full expensing to assets that are bought for leasing or hiring.

3. Research & development reliefs

The existing rates for the merged R&D expenditure credit scheme and the enhanced support for R&D Intensive SMEs will be maintained. HMRC will proceed with establishing the R&D expert advisory panel and continuing to improve signposting and guidance on the reliefs.

An R&D disclosure facility will be launched by the end of the year and use its powers to tackle agents who breach agent standards. The government has also committed to discussing widening the use of advance clearances in R&D reliefs with the intention to consult on lead options in Spring 2025.

4. Transfer pricing reforms

The government will consult on reforms to the UK's rules on transfer pricing, permanent establishments, and diverted profits tax in Spring 2025. The government will consult on further changes to the transfer pricing rules including considering lowering the thresholds for medium-sized businesses and a requirement to report cross-border related party transactions to HMRC. The government will review the transfer pricing treatment of cost contribution arrangements.

5. Patent box and Intangible assets

The patent box will be maintained and the aim is to preserve the UK’s competitive regime for intangible fixed assets.

6. Further corporation tax reliefs

1. The audio-visual expenditure credit and video game expenditure credit will be retained.
2. There is to be a review of the effectiveness of land remediation relief.

7. Tax administration

1. Developing and consulting on new processes to give investors in major projects greater advance certainty
2. Publishing an update in spring 2025 on modernising the technology the corporation tax system utilises.

UK maintains corporate tax competitiveness

The UK Corporate tax regime is still relatively stable subject only to immediate limited reform and longer-term consultation. The current rate of Corporation Tax, remains the lowest in the G7, which alongside various reliefs that are beneficial to both standalone and group companies, ensures the UK maintains its competitive edge in supplementing and encouraging business investment and its attractiveness for international headquarters and holding companies.

International companies can view the UK as an attractive location to locate headquarters and/ or holding companies due to:

1. Broad exemptions for gains on disposals of substantial shareholdings,
2. Broad exemption for dividends paid to UK companies
3. Limited withholding taxed on outbound payments
4. Double taxation agreements/ treaties limiting the foreign withholding of taxes on income received by UK resident companies and preventing double-taxation arising out of cross-border activities.

Capital Gains tax

Tax rates

The lower and higher main rates of Capital Gains tax (CGT) will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. The rate for business asset disposal relief and investors' relief will remain at 10% on gains of £1 million for this year, increasing to 14% from 6 April 2025 and will match the main lower rate of 18% from 6 April 2026.

Carried Interest

The rate of CGT applying to carried interest will increase to 32% from 6 April 2025 and then the carried interest regime will move to the income tax framework from 6 April 2026 onwards, with a consultation in the meantime on what qualifies as carried interest. Carried interest is the portion of profits that private equity managers receive from a successful deal.

It appears that this increase was lower than anticipated. This may have been as a result of widespread criticism when potential reforms to end the carried interest tax regime were first mooted, in the build up to the budget.

Despite a lower increase than anticipated, this rate is now higher than that of Spain, Germany and Italy, and with further planned reforms in 2026 this rate could be increased to that higher than France at 34% and US at 34.7%. 

We must recognise that the individuals affected are those that support UK companies and innovation. Therefore, further reform may lead to private equity managers considering deals overseas, which could impact the UKs reputation as a  central hub for private equity investments and transactions.

Inheritance tax - business property and agricultural property relief  

Agricultural property relief and business property relief will be reformed from 6 April 2026 with 100% relief for the first £1 million of combined assets and 50% relief thereafter. 

Relief for shares not listed on a recognised stock exchange (such as AIM) has also been halved to 50% from 6 April 2026. From 6 April 2027, unspent pension pots (including death benefits payable from a pension) will be brought into a person's estate for inheritance tax purposes.

These reforms will have major implications for family businesses, rural and landed estates. Those effected by these changes will need to consider how and when they pass on family wealth.  

For further information please contact the tax team.