Capital Gains Tax
After speculation that capital gains tax could be raised as high as 39%, the rise here is modest. There is no rise to the rates for property. The rates payable on ‘chargeable gains’, which includes shares, rises from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher-rate taxpayers. These changes come into effect immediately. Tied to this, Business Asset Disposal Relief will be gradually phased out. The rate at which tax is paid within the relief will rise to 14% from April 2025 and to 18% in April 2026. The £1 million cap is unchanged.
Pensions
There is no raid on tax-free pension lump sums or pensions tax relief for higher earners as had been feared. Instead, the principal change takes the form of the inclusion of inherited pensions into IHT calculations from 2027.
Non-dom tax changes
The concept of domicile is to disappear from the tax system. Instead, a new concept of residency will be created. The change is coupled with giving wealthy investors an extra year to come back to the UK as their residency and setting the CGT rebasing date for their previous gains on 5th April 2017.
Stamp Duty
Stamp Duty Land tax for second homes has increased from 3% to 5%.
Inheritance Tax
Aside from the key change that brings pensions into scope for IHT there are also reforms around business and agricultural reliefs designed to protect only the first £1 million of assets. This is intended to remove the relief payable to wealthy individuals who have sought to shelter their gains in farms whilst still protecting families wishing to pass down a family business. Inheritance tax itself will not rise but the threshold on which it is paid will not rise within inflation until 2030 at the earliest.
Aim market
The key change here is that the rate of relief on Aim shares has been cut in half. This reflects the deeply held view in the Treasury that this relief is not leading to increased investment in smaller British companies. It will likely lead to lower demand for these products given the low returns achieved by the Aim market in recent years.
Employers’ National Insurance
The main tax-raising measure is a rise in employers’ national insurance by 1.2% alongside a significant reduction in the associated allowance to £5,000. This has been coupled with some relief for the smallest businesses.
Other measures
• A rise in the carried interest payable by private equity fund managers on deals.
• The freeze in fuel duty is extended by one more year.
• The Government will start tunnelling to bring High Speed Rail 2 into Euston and will deliver a big upgrade to the trans-Pennine express train between York and Manchester via Leeds and Huddersfield.
• Vaping liquid will be taxed heavily.