Chancellor Rachel Reeves’ Historic First UK Budget

In a landmark moment for UK fiscal policy, Chancellor Rachel Reeves delivered her first Autumn Budget on 30 October 2024. This article outlines some of the most significant tax changes and their potential impact.

Changes to the taxation of carried interest, a key issue for the private equity industry, were a focal point. From April 2025, the capital gains tax (CGT) rate for carried interest will rise from 28% to 32%, aligning with the higher income tax rate. By April 2026, the regime will overhaul how carried interest is taxed, introducing a 47% rate for non-qualifying income but offering a reduced effective rate of 34.075% for qualifying income under new conditions. This shift underscores the government’s intention to tighten carried interest rules while offering concessions for certain qualifying scenarios.

The Budget introduced CGT increases with immediate effect. The higher CGT rate for taxpayers rose to 24% (up from 20%), while the basic rate jumped from 10% to 18%. Business asset disposal relief (previously known as entrepreneurs’ relief) remains but with phased rate increases: from the current 10% to 14% by 2025 and then to 18% by 2026. The continuity of the relief, albeit at higher rates, tempered concerns of its complete abolition.

A significant revenue-raising measure (the biggest in the Budget) was the increase in employers’ NICs from 13.8% to 15%, with effect from April 2025. Additionally, the threshold for employer NIC liability will drop from GBP9,100 to GBP5,000 per employee. These changes have not been popular, and industries with large, low-wage workforces, which are likely to bear the brunt, have warned of cascading cost pressures.

The Chancellor’s Budget abolished the longstanding “non-dom” tax regime, replacing it with a residence-based system starting next April. While aimed at ensuring fairness, critics argue it could deter high net worth individuals and business leaders from basing themselves in London, potentially impacting the city’s status as a financial hub.

The energy sector faces increased fiscal pressure with reforms to the Energy Profits Levy, raising the effective tax rate on oil and gas production to 78%. Investment allowances were largely removed, although the decarbonisation allowance remains, signalling a push toward cleaner energy investments.

The Budget laid out a corporate tax roadmap, maintaining the corporation tax rate at 25% while committing to capital allowance stability and modernised tax administration. These measures aim to provide long-term predictability for businesses and attract investment.

 Farmers and small business owners were notably impacted by changes to inheritance tax (IHT). From April 2026, the exemption threshold for agricultural property will drop to GBP1 million, with a 20% IHT rate on excess value. This change has sparked protests over its implications for generational farming and food security.

To boost the pipeline of IPOs, the government announced Pisces (Private Intermittent Securities and Capital Exchange System), a tax-exempt trading platform. Additionally, AIM shares will now face a 50% reduction in inheritance tax relief, introducing a 20% effective tax rate.