As a subscriber to the Irish News, you had the opportunity to ask a question of Aisléan Nicholson who is a Business Tax advisory partner with Deloitte, based in Belfast.
Aisléan has studied today’s Autumn Budget and answered your questions.
Q As someone who is self-employed, how will the new budget affect the tax-free allowance? A Ryan, Belfast
A All UK tax-residents, irrespective of age, benefit from a ‘personal allowance’ - an amount of income which can be received tax free. Prior to today’s Budget, the rate was set at £12,750 and was frozen up to and including the 2027/28 tax year. A frozen personal allowance means that as inflation increases, the real value of the personal allowance diminishes over time. Today’s Budget saw no further extension to the freeze in the personal allowance and a commitment for the personal allowance to rise in line with inflation from April 2028. As a result, the amount of income which can be received tax-free will remain at £12,750 for years to come. For high earners (over £100k p.a.) the personal allowance is withdrawn, reducing by £1 for every £2 of income in excess of £100k.
A husband and wife/civil partners each have their own personal allowance. Usually, a personal allowance cannot be transferred to another person or carried into another tax year. However, in limited circumstances there can be a transfer of 10% of the personal allowance (£1,260) to a partner, who will receive a tax reduction of 20% of this amount. There can also be other options, depending on circumstances, which can see some or all of the non-working partner’s allowance utilised eg by way of allocation of income generating assets to that partner, or potentially by employing them in the business. Each of these should be considered on their facts and circumstances and wider consideration of, for example, the availability of benefits and/or tax credits.
Q Will there be an increase to the ISA allowance over £20k?
A ISAs are a tax-efficient savings vehicle. Where an ISA is used, there is no tax on the income or gains within the ISA, no tax on capital gains arising on the withdrawal of funds from an ISA and no minimum holding period (typically, although some specific products offer better returns for reduced access).
There are various types of ISA, with the most popular being the stocks and shares ISA and the cash ISA. The Chancellor announced that there will be no changes to the ISA regime today. The limit remains at £20,000 p.a. for cash and/or stocks and shares ISAs.
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Q What’s the expert view on the suggested increase to employers NIC and how that’ll impact employee pay packets? C Whyte, Belfast
A National Insurance Contributions are a type of tax paid in the UK by employers, employees and self-employed individuals. The rates and thresholds differ depending on which one of those three classes of taxpayer you are.
The position announced by the Chancellor today sees no additional cost for employees, as employee National Insurance Contributions are unchanged. For earnings up to £12,750, no employee NICs are deducted; for earnings above that but less than £50,270 the rate remains at 8%, falling to 2% for earnings above that upper threshold.
The Chancellor did, however, increase employer National Insurance Contributions by 1.2% to 15% on earnings above £5,000p.a. (which has been reduced from £9,100 p.a.). This is an incremental cost to employers when paying their employees’ wages, commencing from 6 April 2025. Coupled with the further increase in the UK’s minimum hourly wage to £12.21 from April 2025 (£10/hr for 18-20 year olds; £7.55 for apprentices and 16-17 year olds), which was announced on Tuesday just in advance of the Budget, this rate change could represent a substantial increase in wage bills for certain employers, albeit offset slightly by an increase and extension to the Employer Allowance.
For self-employed individuals the NICs position remains as it was before the Budget.
So, for employees, there is no immediate impact on pay packets and for those employees paid a minimum wage, there will in fact be a net increase in their pay packet due to the higher salary from April 2025. Over time it remains to be seen whether the increase in wage costs for employers will have a restrictive impact on future salary increases and companies may also cut back on hiring where the costs are higher.
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Q I have a private pension and a workplace pension. What impact will the Budget have on the tax paid on my pension payments? C O’Neill, Derry
A At present, savers into private and workplace pensions are incentivised by way of income tax relief on contributions to a registered pension scheme up to the amount of an annual allowance. Employers can also make contributions to an employee’s pension scheme and these can be free of income tax and NIC. The annual allowance can be limited by reference to the individual’s relevant UK earnings, which claws back some or all of the tax relief for high-earners. A person can still save more than the annual allowances into a pension, but the tax advantage may diminish as they do so, depending on their circumstances.
Once in a pension, the growth the investments funded by the contributions to the pension is tax-free; neither the pension nor the individual is liable to tax on the income or the gains. However, when an individual draws their pension from the scheme the income is usually taxable, although there is a provision for a tax-free lump sum to be taken, namely for 25% of the pension pot, capped at £268,275. None of these measures were changed by today’s Budget.
Another feature of registered pensions is that previously they were excluded from the value of the estate for inheritance tax purposes on death. The Chancellor announced today that unspent pension pots will be brought within the scope of inheritance tax from April 2027.
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How will the proposed raise in inheritance tax effect the ordinary person if they are left property by their parents/family? S Glennon, Belfast
A Inheritance Tax (IHT) is a tax on the value passing from one individual to another person. This usually arises when an individual passes away and their “estate” transfers to their beneficiaries (usually those named in their will), but there can also be IHT when an individual makes a gift while they are still alive. It is usually payable by the person transferring the value or, more usually by their estate, where the transfer is on death.
Most families will be unaffected by today’s changes - it’s worth bearing in mind that the government’s own statistics indicate that fewer than one in 20 estates pay any IHT at all.
Before today, typically IHT arose at a rate of 40% where family assets were passing on death, subject to the availability of the nil rate band of £325,000 (with any unused nil rate band of a deceased spouse or civil partner passing to the other spouse). There was also a residence nil rate band, where the main residence is left to children or grandchildren, which meant that in effect, a couple could collectively pass assets of up to £1m to their children and/or grandchildren on death without IHT falling due.
Today’s announcements by the Chancellor on Inheritance tax (IHT) saw the main rate of IHT remain unchanged, with thresholds being frozen until April 2030 (an extension of two years).
Changes announced include bringing unspent pension pots, usually written into trust and therefore kept outside of an estate, within the scope of inheritance tax from April 2027.
There were also changes to some of the valuable reliefs which were used to transfer certain business and agricultural property assets free of IHT by applying a 100% relief. The changes announced today see a 50% reduction in the rate of relief where the value of combined business and agricultural assets exceeds £1m, effective from April 2026. The first £1m can still obtain the 100% relief. Shares designated as “not listed” on the markets of a recognised stock exchange, such as AIM shares, will only benefit from the 50% relief.
Q How much could people who receive Carer’s Allowance benefit from the proposed rise in earning threshold from £151 to £181? S Glennon, Belfast
A The Carer’s Allowance is quite a complicated allowance which received much attention earlier this year when it was reported that some carers who had (often inadvertently) earned more than the earnings threshold (the maximum amount which can be earned before the allowance is withdrawn) were being chased for significant repayments of previously received Carer’s Allowance.
Today’s Budget confirmed that there would be an increase in the Carer’s Allowance threshold to an amount equivalent to 16 hours per week at the National Living Wage - around £10,000 p.a.. This means that a carer can earn up to around £45 per week more from April 2025 and still receive the Carer’s Allowance, which itself remains at £81.90 per week. The increased threshold opens up the possibility of obtaining carer’s allowance to a larger population of carers.
Q What will the proposed changes to Capital Gains Tax mean for landlords? S Glennon, Belfast
A A chargeable gain arises to a landlord when they dispose of a property that is not their main private residence. At its simplest, the size of any gain will depend on what they paid for the property and any costs associated with its acquisition versus what they received in proceeds for the sale.
Before today, for a higher rate taxpayer, the rate of capital gains tax (CGT) on the disposal of a residential property was 24%, or 20% if the property was non-residential. A rate of 18% applied to chargeable gains on residential property up to the individual’s unused basic rate band, with rate of 10% on non-residential property. Each individual has a £3,000 p.a. annual exempt amount - i.e., the first £3,000 of any gain is exempt from CGT.
Today’s announcement saw the Chancellor increase the main rates of CGT to 18% and 24%, bringing them in line with the existing rates for the disposal of residential property. The new rates apply as of 30 October 2024. Whilst not relevant to landlords, some entrepreneurs who own trading businesses will also have keenly observed today’s announcement that the rate of Business Asset Disposal Relief will increase from 10% to 14% in April 2025, and then 18% from April 2026.
Landlords should also be aware of the further increase in the Stamp Duty Land Tax surcharge which applies on the acquisition of an additional dwelling. The surcharge increases from 3% to 5% for exchanges from 31 October 2024.
The responses provided by Deloitte are general responses in respect of the Autumn Budget 2024 and do not constitute advice. You should always seek professional tax advice with regards to your specific circumstances.
* Aisléan Nicholson is a Business Tax advisory partner with Deloitte, based in Belfast, focusing on the Northern Ireland market. Before joining Deloitte Ireland, Aisléan spent more than 18 years with Deloitte UK, advising domestic and multinational companies on UK corporate and international tax matters, including business restructurings, mergers and acquisitions, financing structures, transfer pricing models and UK tax strategy.
