Budget 2024: Industry Comment and Reaction, Part Two

“Investing in tech for the NHS, HMRC, MOD, and other public bodies is vital to speed up and enhance the quality of services people rely on. But alongside funding for AI, and data, we need investment in the skilled digital professionals who will run these systems and who must be not just competent but ethical. This tech impacts our money, jobs, security and well-being, so accountability is non-negotiable.

“We must learn the lessons from the Post Office injustice; new tech investment must be managed by professionals held to independent standards, to secure the trust we need in this transformational technology.”

Matthew Maxwell Scott, executive director of ACSO said:

“It is a very disappointing day for our civil justice system. The government has essentially continued the previous administration’s treatment of civil justice as a Cinderella service following the Budget.

“Departmental expenditure limits have been set for 2025/26, and while the extra £1.9bn announced for Justice represents a 5.6 per cent increase (excluding depreciation) all the extra cash is for Criminal Justice, which leaves nothing for Civil, where most of the public interact with the law.

Budget comment from Rory MccGwire, founder of Start Up Donut;

“This government appears committed to addressing the tough financial realities they’ve inherited, and for that, I commend them.

However, it’s ironic that the hardest-working segment in our country – families who run small businesses – are being hit the hardest by these ‘Make Work Pay’ changes. While I’m relieved the Employment Allowance offers some relief for the smallest businesses, who often struggle the most with covering their costs and complying with the seemingly endless rules on tax and employment, the recent focus on ‘protecting the workers’ has created a sense of a ‘them-and-us’ divide in this Budget.

Small businesses account for 48% of employment in the UK, yet this approach seems to pit employees against their employers. For many, the risks, workload, and challenges of running a small business may start to feel like they no longer match the limited rewards.”

SIMPLY BUSINESS

 Bea Montoya, COO of Simply Business who insure nearly 1 million SMEs across the UK.

Prior to the Budget, Simply Business research revealed that 1 in 4 small businesses said they fear closure if conditions don’t improve. The same survey showed that Labour was singled out as the party that best represented the interests of small business – so was this vote, hope, and trust vindicated?

Bea says: “Small businesses had high hopes for the new Labour Government and this Budget was a watershed moment for whether their vote was vindicated. The extension to Business Rates relief and the removal of the income tax freeze are big wins, and excluding some of the smallest businesses, with low employment costs, from the brunt of the Chancellor’s National Insurance hikes is a relief.

However, increasing Employers National Insurance Contributions to 15% and a reduction in the threshold will further squeeze the margins of many other SMEs, who are already operating under enormous pressure. These businesses may be forced to consider whether they can afford to keep their current workforce or if they need to reduce the hours of current staff in order to recoup some costs. This increase will particularly impact hospitality businesses, where staffing is one of their biggest – and most essential – expenses.

Simultaneously, while the minimum wage hike is fantastic for workers, it’s a headache for small employers. Many will need to rethink hiring plans and review their workforce due to this added expense. For SMEs already on thin margins, this isn’t welcome news. If the government truly wants to spark growth, they need to do more to help this crucial sector thrive.”

STAMP DUTY

Jonathan Bone, Head of Mortgages at online mortgage broker Better.co.uk, shared insights on the new measures introduced and their potential effects on the property market:

“Ahead of the announcement, there was widespread concern that the Chancellor would remove the 0% stamp duty threshold for first-time buyers. However, the Chancellor is committed to supporting first-time buyers and only announced increasing the amount of tax paid when buying a second home.

“This means anyone buying an additional property, whether as an investment or a second home, will pay 5% in stamp duty for properties up to £250,000, an increase from the previous 3%. The government is keeping the current stamp duty relief for first-time buyers, allowing them to avoid paying tax on homes priced up to £425,000, although this relief will lower to £300,000 next year.

“For first-time buyers, the rise in taxes for second homes and investment properties might reduce competition from investors, which could help ease property prices. This, in turn, should make it slightly easier for first-time buyers to find a more affordable home. Continued stamp duty support should also make it easier for first-time buyers to enter the housing market.”

CGT, BUSINESS RATES & MORE

 Nicholas Hyett, Investment Manager at Wealth Club, shares comments on:

• Inheritance tax relief on AIM,
• Capital Gains Tax Reform; and
• Business Relief Reform.

Inheritance tax relief on AIM

“The threat of removing inheritance tax relief from AIM shares has dragged on the market for months. Today at least provides some certainty about what the future looks like, even if the IHT relief on offer has been cut in half. That certainty has driven a 3.9% spike in the AIM all-share index.

While the cut to tax relief will probably weigh on valuations long term, making it more expensive for small UK companies to raise funding, not abolishing it altogether has avoided the worst-case scenario of significant disruption as capital fled the market.”

Capital Gains Tax Reform

“The capital gains tax straight jacket has been pulled steadily tighter for years. Between 2022 and 2024 the tax-free allowance for CGT was cut from £12,300 to £3,000, and the decision to raise CGT rates across the board today will only make matters worse.

Capital gains tax is only paid by a minority of, generally wealthier, taxpayers, which probably explains its appeal to the government. However, it also represents a tax on risk taking – since it’s only charged on gains from investments or setting up your own business.

It’s a far cry from the growth focused, business friendly budget that was originally billed.

For investors facing higher CGT bills it may be worth considering investments in Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) qualifying companies. These government backed venture capital schemes, one of the few to avoid reform in today’s budget, allow you to defer or reduce capital gains taxes as well as offering income tax relief of 30-50% up front.

These schemes will become even more important going forwards, not just for investors but for small companies that may find AIM less welcoming in future.”

Business Relief Reform

“Business relief is crucial to the long-term future of many small family-owned businesses up and down the country. The good news is that the reforms in this budget are less draconian than feared, with full relief capped at a still fairly generous £1 million and IHT falling to 20% thereafter.

The decision not to add a hard cap to Business Relief avoids the worst-case scenario for those invested in specialist products that aim to qualify for business relief by investing in things like solar farms, property development lending and care homes. These are illiquid assets, and complete tax relief withdrawal risked investors being locked in for a long time and/or painful markdowns in value.

Nonetheless for larger businesses up and down the country, this reform will be a source of considerable concern.”

HIGH NET WORTH

Brendan Harper, Head of High-Net Worth Technical Services at Utmost International, leading provider of insurance-based wealth solutions.

“The Chancellor’s Autumn Budget has delivered both clarity and challenge to high-net-worth and globally mobile individuals, introducing the Foreign Income and Gains (FIG) regime and making significant changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT). These reforms mark a clear pivot towards a more demanding UK tax landscape for wealth and investment and underline the importance of maintaining portable, adaptable structures in response to tightening policies.”

“These landmark changes will likely trigger a surge in wealth restructuring, with a heightened focus on tax efficiency and flexibility. Wealth advisors can expect a rise in interest for alternative solutions and increased relocation planning as clients look to jurisdictions offering more favourable tax regimes. This Budget is a wake-up call: those affected will need to act swiftly, reassessing and adapting their financial plans to navigate the UK’s evolving tax environment effectively.”

Main Points of Interest:

• Foreign Income and Gains (FIG): Replacing the remittance basis, FIG allows new UK residents with a long-term foreign residency to enjoy a four-year tax-free period on overseas income and gains, even when remitted to the UK. However, domicile status is now irrelevant – eligibility is based on a minimum of ten consecutive years spent abroad prior to UK residency.
• Temporary Repatriation Facility: For those not eligible for FIG due to extended UK residency, the temporary facility offers preferential tax rates on overseas income and gains for up to three years.
• Inheritance Tax Reforms: IHT will no longer apply to non-UK assets if an individual has been non-UK resident for at least ten of the last twenty years. However, existing trusts have limited “grandfathering” protections, meaning that many high-net-worth individuals may need new strategies for long-term wealth protection.
• Capital Gains Tax Increases: The new CGT rate and exemption reduction (from £12,300 to £3,000) make direct asset holdings more vulnerable to CGT, which could prompt a shift toward more tax-efficient structures.
• Resident Non-Domicile Regime Changes: Scrapping this regime means non-domiciled individuals residing in the UK for more than four years will need to re-evaluate wealth protection strategies, with traditional trusts providing only limited shelter. This change may also spur relocation interest to jurisdictions like Portugal, the UAE, and Monaco.