From April 6, 2025, the new UK tax regime for 2024/25 comes into effect.
The Autumn Budget 2024, presented on 30 October 2024 by Chancellor of the Exchequer Rachel Reeves, introduced several significant fiscal changes for the 2024/2025 tax year.
Here is a summary of the key measures:
National Insurance Contributions (NICs):
Employer NIC rate increase: From 6 April 2025, the rate of National Insurance Contributions paid by employers will increase from 13.8% to 15%.
In addition, the earnings threshold at which these contributions become due will be reduced from £9,100 to £5,000.
Inheritance Tax (IHT):
Nil-rate band freeze: The IHT nil-rate band will remain frozen at £325,000 until 2028.
From April 2027, unused pension funds left to beneficiaries other than a spouse will become subject to inheritance tax.
Stamp Duty Land Tax (SDLT):
Increase on additional properties: The surcharge on second homes and additional residential properties will rise from 3% to 5%, effective from 31 October 2024.
National Minimum Wage:
Wage increase: From 1 April 2025, the National Minimum Wage will increase by 6.7%, bringing the minimum hourly wage to £12.21.
Vehicle Excise Duty (VED):
VED rate increase: From 1 April 2025, VED rates will increase for petrol, diesel, hybrid, and low-emission vehicles.
Electric vehicles will continue to benefit from reduced rates to encourage uptake of zero-emission cars.
Duties on Alcohol and Tobacco:
Tobacco duty increase: All tobacco products will see an increase of 2% above inflation, plus an additional 10% increase for hand-rolling tobacco, effective 30 October 2024 at 18:00.
Alcohol duty reduction: Alcohol duty will be reduced by 1.7% for draught products under 8.5% ABV, leading to a 1p per pint cut.
Capital Gains Tax (CGT):
Main rate increases: For disposals made from 30 October 2024, the basic CGT rate increases from 10% to 18%, and the higher rate from 20% to 24%.
These changes apply to gains on assets other than residential properties and carried interest.
Investors’ Relief: From 30 October 2024, the lifetime limit for Investors’ Relief is reduced from £10 million to £1 million.
Carried interest: From 6 April 2025, CGT on carried interest will be taxed at 32%.
Corporation Tax:
The main rate of Corporation Tax remains at 25%, in line with the government’s pledge not to raise it during the current Parliament.
| Taxable Profits | Corporation Tax Rate |
|---|---|
| Up to £50,000 | 19% |
| £50,001 to £250,000 | Marginal Relief applies |
| Over £250,000 | 25% |
Thresholds are split between associated companies.
Energy Profits Levy:
The Energy Profits Levy rate has been increased to 38% and extended until 31 March 2030.
Abolition of Furnished Holiday Lettings (FHL) Regime:
From 6 April 2025, the FHL tax regime is abolished.
Income and gains from short-term lets will now be treated as standard property business income.
New Foreign Income and Gains Regime (FIG):
Eligibility: Individuals who become UK tax residents after a period of 10 consecutive years of non-residence.
Duration of benefit: For the first four years of UK tax residency.
Benefits:
- Full exemption from UK tax on foreign income and gains during the 4-year period
- No tax on remittances during this period
Transitional Measures:
Temporary Repatriation Facility (TRF):
From 6 April 2025 to 5 April 2027, former non-doms may repatriate pre-April 2025 foreign income and gains at a reduced 12% tax rate.
Rebasing of Foreign Assets:
Those who claimed non-dom status between 2017/18 and 2024/25 may elect to rebase the value of foreign assets to their value as at 5 April 2017 for CGT purposes.
Inheritance Tax (IHT) – Residence-Based Reform:
From 6 April 2025, IHT will apply to the worldwide estate of individuals considered “long-term UK residents”, defined as those who have been UK-resident for at least 10 of the last 20 tax years.
Self-Employment & Making Tax Digital (MTD):
The rollout of Making Tax Digital for Income Tax for the self-employed and landlords will happen in stages:
- From April 2026: MTD becomes mandatory for those earning over £50,000 per year
- From April 2027: Expanded to those earning over £30,000
- Before the end of the current Parliament: MTD may be extended to those earning over £20,000, with timing to be confirmed in a future fiscal statement
These changes aim to modernise the tax system, increase compliance, and simplify reporting for taxpayers