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Budget 2024: £40bn tax hike through NIC and Capital Gains Tax leaves businesses on edge

In her debut Budget, Chancellor Rachel Reeves has introduced £40bn in tax hikes, largely focused on increasing employer National Insurance Contributions (NICs) and implementing a temporary repatriation facility for non-domiciled individuals.

According to Nimesh Shah, CEO of Blick Rothenberg, while pre-Budget rumours had suggested sweeping tax changes, the actual announcements were more focused, though still significant in impact.

The primary tax increase is a £25bn rise from NIC changes. Starting April 2025, employer NICs will jump by 1.2 percentage points to 15%, with a lower NIC threshold of £5,000. For businesses, this means an additional cost of £615 per employee, creating substantial expense for SMEs. A business with five employees earning £50,000 each will see their NIC bill increase by over £5,500.

Capital Gains Tax (CGT) also saw adjustments, with rates rising to 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Although CGT changes were less severe than anticipated, entrepreneurs will feel the impact, as the Business Asset Disposal Relief’s tax-saving potential falls to £60,000 by 2026. The carried interest regime for private equity also faces a hike, effectively increasing CGT on carried interest to 32% from April 2025, and further bringing it within the income tax and NIC scope from 2026.

The Budget introduced a temporary repatriation facility for non-domiciled individuals, allowing them to remit overseas funds at a reduced 12% tax rate for two years. This initiative is expected to generate £12.7bn in revenue. However, the move has left many non-doms considering their options, especially with the looming inheritance tax implications of previously announced reforms.

Family businesses face new challenges with a £1 million cap on Business Property Relief and a 50% discount thereafter. Although these changes take effect in 2026, Shah advises early planning, noting that anti-forestalling measures on lifetime transfers could complicate efforts.

Shah’s overall take on the Budget is mixed; while it avoided the more severe changes that many feared, it leaves room for more tax hikes in the coming Spring Budget. Businesses and investors will need to monitor developments closely as they navigate the evolving fiscal landscape.

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Budget 2024: £40bn tax hike through NIC and Capital Gains Tax leaves businesses on edge

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