The Chancellor’s Autumn Budget 2024 has introduced a series of significant tax changes targeting business owners, investors, and the broader fund management industry. These adjustments are set to influence tax planning strategies across the board, particularly for those with interests in capital gains, inheritance planning, and employer tax contributions. While no further changes were announced by the Chancellor to SEIS/EIS, it was encouraging to hear the restated commitment by the Labour government to fostering innovation and nurturing the unicorns of tomorrow. Here’s a breakdown of what to expect and how it might impact various sectors.

1. National Insurance Increase for Employers

From April 2025, the National Insurance (NI) contribution for employers will see a hike of 1.2%. This adjustment could have a broad impact, especially for large businesses with substantial workforces. Small businesses, in particular, might feel the pinch, necessitating careful planning to manage these increased costs.

2. Capital Gains Tax (CGT) Increases

The Budget has doubled down on adjustments to Capital Gains Tax rates:

• Lower Rate: Raised from 10% to 18%.
• Higher Rate: Increased from 20% to 24%.

This change reflects the government’s intent to close the gap between income tax and CGT rates. For those holding assets likely to be disposed of within the next few years, this increase may encourage early action to benefit from the current, lower rates before the hike takes effect.

3. Business Asset Disposal Relief (BDAR) 

Good news arrives for business owners regarding Business Asset Disposal Relief (BADR), formerly known as Entrepreneur’s Relief. The relief rate will remain at 10% through 2024/2025, but it’s set to rise incrementally—first to 14% from 2025/2026 and then to 18% by 2026/2027. These phased increases provide some runway for business owners considering the sale of qualifying business assets, although they’ll want to carefully factor in these upcoming rate changes in any long-term exit planning strategies.

4. Adjustments to Agricultural Business and Business Property Relief

To encourage legacy planning within the agricultural and business sectors, the government has announced a new structure for Agricultural Business Relief and Business Property Relief. The first £1 million in qualifying assets will be exempt from inheritance tax (IHT), with any amounts above that threshold subject to a 50% discount, translating to an effective IHT rate of 20%. For business owners and agricultural property holders, this change could incentivise more substantial estate planning, as the benefit effectively reduces IHT exposure for these assets while still encouraging generational asset transfer within reasonable tax boundaries.

5. AIM Market Shares: IHT Relief at 50%

Shares listed on the Alternative Investment Market (AIM) will benefit from a new, effective IHT relief rate of 50%, reducing the taxable amount to an effective rate of 20% for qualifying shares. This adjustment may spur renewed interest in AIM investments, particularly for individuals interested in high-growth companies, as the enhanced IHT relief could enhance the appeal of these risk-tolerant investments within diversified estate planning portfolios.

6. Fund Management Industry: Increase in CGT Rates on Carried Interest

Carried interest—the share of profits fund managers receive from the performance of an investment—will be subject to an increased CGT rate of 32% starting from 2025/2026. This change reflects the government’s response to calls for greater tax parity within the fund management sector. It’s anticipated that this increase will bring in additional revenue while aligning the UK’s tax treatment of carried interest more closely with other jurisdictions.

Final Thoughts

These updates signal the government’s intent to streamline tax obligations while maintaining a balance between incentivising investment and increasing tax revenues. For business owners, investors, and fund managers, now is the time to take stock of current tax structures and consult with advisors to ensure tax efficiency under these new rules. Careful planning and proactive strategy adjustments can help mitigate the impact of these changes and capitalise on available reliefs.