I must admit, I underestimated Labour’s approach to "Fixing the Foundations", if this is 'fixing', I would hate to see 'improving'. True to its word, the long awaited 2024 Autumn Budget brings heavy handed hits with the all too familiar Labour touch that targets asset rich individuals and businesses alike. For farming families, inheritance tax planning will be top of the agenda at the next annual meeting. However there is no point getting angry, just focus on getting even, after all, we’ve planned around worse!
With new tax policies, relief restrictions, and wage hikes across the board, there’s a lot to unpack, especially for agricultural businesses. This summary covers everything farming families and employers need to know to make the most of the current reliefs and adapt to these changes.
Employer National Insurance Contributions (NICs):
Employer NICs will increase by 1.2%, taking them to 15% from April 2025, with the Secondary Threshold reduced to £5,000, raising NIC obligations for businesses. This lowered threshold will remain in effect until April 2028, when it will be linked to CPI.
Additionally, the Employment Allowance will more than double to £10,500, providing significant relief for smaller employers by offsetting NICs on up to four full-time minimum-wage employees. The previous £100,000 threshold for eligibility has been removed, making this relief available to all eligible employers. A small silver lining perhaps...
National Living Wage:
The National Living Wage will increase to £12.21 per hour from April 2025, significantly impacting payroll costs across sectors such as agriculture. For younger workers aged 18-20, the minimum wage will rise to £10 per hour, which will affect seasonal and entry-level agricultural roles.
Additionally, wages for 16-17-year-olds and apprentices are set to rise to £7.55 per hour, adding further pressure to wage budgets in industries reliant on younger workers.
Capital Gains Tax (CGT):
Capital Gains Tax rates will increase from 10% to 18% for basic rate payers and from 20% to 24% for higher-rate payers. Business Asset Disposal Relief (BADR) will also see its rate increase from 10% to 14% in April 2025, and then to 18% in April 2026, impacting tax on future qualifying disposals for asset-heavy sectors like agriculture.
Stamp Duty Land Tax (SDLT):
The SDLT surcharge on additional dwellings will rise from 3% to 5%, which will impact the cost of purchasing second homes and additional properties.
Additionally, companies buying high-value properties over £500,000 will now face an SDLT rate increase from 15% to 17%, adding a higher cost burden for corporate buyers in the property market.
Inheritance Tax (IHT) and APR/BPR Reforms:
With the new reforms, inheritance tax planning is essential for farming families. From April 2026, APR and BPR will only offer 100% IHT relief on the first £1 million of combined agricultural and business assets, with values above this amount qualifying for only 50% relief.
By structuring ownership between spouses and trusts, farming families can still protect significant assets. For example, a combination of assets and allowances such as £1,000,000 for the wife, £1,000,000 for the husband, £1,325,000 each in their respective trusts, each spouse’s nil rate band (NRB) at £325,000, plus an additional £175,000 resident nil rate band (RNRB) per individual against their main residence (if you keep the estate below £2m and gift to direct descendants), could add up to a potentially £5,650,000 inheritance tax-free.
For those less inclined towards trust structures, direct gifting to the next generation remains an option, though it’s essential to gift wisely to secure any potential CGT-free base cost uplifts on death. The 7-year rule remains a crucial factor in any direct gifts or trust structures, as well as the potential for reservation of benefit, meaning strategic planning here is paramount.
Additionally, APR eligibility will be extended to include environmentally managed land under government-approved schemes starting April 2025, offering flexibility for conservation-minded estates.
BPR for AIM-listed shares will reduce to 50%, targeting previously fully relieved unlisted investments.
Trusts and APR/BPR Allowances:
With the April 2026 changes, each trust established before October 30 2024, will benefit from a £1 million APR/BPR allowance.
For trusts established after this date, allowances will need to be shared, limiting but still enabling planning flexibility for agricultural estates.
Double Cab Pickups Reclassified: (Poor taste, even for Labour!)
Following a Court of Appeal judgement, the Government will treat double cab pickup vehicles with a payload of one tonne or more as cars for certain tax purposes.
From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, these will be treated as cars for the purposes of capital allowances and Benefit-in-Kind.
Pensions and Inheritance Changes:
Starting April 2027, unspent pension funds will be brought into IHT calculations, ending the tax-free status previously enjoyed by these assets for inheritance purposes.
Both the Basic and New State Pensions will increase by 4.1% in April 2025, bringing the State Pension to £230.25 per week, which will be welcomed by pensioners amidst the other tax changes.
Business Rates and Relief for Rural Sectors:
Retail, hospitality, and leisure properties in England will receive a 40% relief on business rates in 2025-26, capped at £110,000 per business.
Additionally, the small business rates multiplier will be frozen at 49.9p for 2025-26, helping to avoid the inflation-linked increase that would otherwise apply.
School Fees and VAT:
The VAT exemption for private school fees has been removed. Private education and vocational training will now incur VAT at the standard rate of 20%, starting with terms beginning on or after 1 January 2025. This change will affect families funding private education, increasing costs for those with children in private schools.
Some prepayments made after 29 July 2024 are also affected, with VAT applied even if paid before the 2025 terms start.
Fuel Duty and Vehicle Excise Duty (VED):
Fuel duty will remain frozen through March 2026, maintaining the 5p cut introduced in previous budgets. However, Vehicle Excise Duty (VED) rates will increase from April 2025 for hybrid, petrol, and diesel vehicles, while zero-emission vehicles will stay at a flat rate of £10 until 2030
Alcohol and Tobacco Duty:
Draught duty on pub-sold products will see a slight reduction, benefiting rural pubs and producers.
Tobacco duties rise by RPI plus an additional 2% on hand-rolling tobacco, promoting public health.
Non-Dom and Offshore Trust Reforms:
A significant shift in the tax regime for non-domiciled individuals, starting in 2025, the current non-dom regime will be replaced by a residence-based system. New arrivals will be offered four years’ relief on foreign income upon entering the UK, provided they were non-residents for the prior ten years.
Additionally, Overseas Workday Relief will be extended to four years, but it will be capped at the lower of £300,000 or 30% of total employment income.
Rural Infrastructure and Digital Connectivity:
Project Gigabit allocates £500 million specifically for rural road and transport improvements, along with additional support for digital infrastructure. This aims to enhance high-speed broadband availability in rural areas, supporting digital tools and helping to advance digital farming initiatives.
National Wealth Fund and Industrial Strategy:
The budget allocates long-term investments toward capital for technology, green energy, and infrastructure. These initiatives indirectly benefit rural sectors by expanding resources and supporting sustainable practices.
Research & Development (R&D) Reliefs:
No changes were announced to R&D tax reliefs, though £20.4 billion in funding has been allocated through 2025-26 to support advancements in science, technology, and digital integration across sectors, including agriculture.
Contact Us Today…
The 2024 Budget’s reforms call for strategic planning in estate structuring and tax efficiency. For personalised guidance, Mitchells can help optimise your estate structure and leverage available tax reliefs under the new regulations. Contact us to ensure your business remains tax-efficient and well-prepared.
For a full breakdown of the 2024 Budget details, see the official HMRC and HM Treasury press releases here https://www.gov.uk/government/organisations/hm-treasury
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