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As the anticipation for the Autumn Budget 2024 builds, investors and business owners alike are bracing for significant changes. With a £22 billion fiscal deficit and government debt reaching unprecedented levels of £2.7 trillion, Chancellor Rachel Reeves faces mounting pressure to stabilize the economy while maintaining Labour’s pledge to protect working-class incomes. The following updates highlight new measures and policy shifts that will directly affect the investment and business landscape in the UK. Please follow this link to read our original piece on the budget.

UK National Debt as a percentage of GDP by Quarter since Q1 2014

VAT on Private School Fees

One of the more contentious moves in this budget is the introduction of VAT on private school fees, set to take effect from January 1, 2025. This measure is expected to raise approximately £1.7 billion annually and aims to address what Labour sees as an inequality between private and state education. Additionally, private schools will lose their eligibility for business rates relief starting from April 2025. This reform, while primarily aimed at wealth redistribution, could have broader economic effects, particularly on the property and education sectors.

Energy Profits Levy Increase

To capture windfall profits from energy companies during this period of high oil and gas prices, the Energy Profits Levy will increase from 35% to 38%. The government expects this to bring in an extra £4.5 billion annually, which will be used to support public services and help address the deficit​. This levy, although targeted at large corporations, will inevitably have ripple effects across the energy sector and could influence investment strategies in utilities and infrastructure.

Multinational Taxation Reforms

The Autumn Budget 2024 introduces new anti-arbitrage rules under the Multinational Top-Up Tax (MTT) and Domestic Minimum Tax (DMT), both aimed at curbing tax avoidance by large multinational corporations. These reforms, which take effect in the 2024/25 financial year, are designed to close loopholes that have allowed companies to reduce their tax liabilities through international accounting tactics. This is expected to generate billions in additional revenue, marking a shift towards a fairer corporate tax environment in the UK.

Abolition of the Non-Domicile Tax Regime

A landmark reform in this budget is the abolition of the non-domicile tax status from April 2025. Non-domicile tax status has historically allowed wealthy individuals to avoid UK taxes on overseas income, but its removal signifies a broader push for fiscal fairness. Replacing this regime with a residence-based taxation system is expected to generate £3 billion annually​. This reform will have profound implications for high-net-worth individuals and their investment strategies, both in the UK and abroad.

Abolition of the Furnished Holiday Letting (FHL) Regime

The government has announced that the Furnished Holiday Letting (FHL) regime will be abolished by April 2025, with anti-forestalling rules in place starting in March 2024. The abolition of the FHL regime will affect approximately 335,000 properties that currently benefit from favourable tax treatment, leading to an estimated increase of £500 million annually in tax revenue​. Investors in holiday properties and the broader property market will need to reassess their portfolios as a result of this significant change.

HMRC Recruitment Drive

In a bid to close the £33 billion tax gap, HMRC is set to hire an additional 5,000 staff. This recruitment drive aims to improve tax collection and enforcement, helping the government recover unpaid or evaded taxes. The expansion of HMRC’s capabilities signals the government’s increased focus on compliance and reducing the tax avoidance and evasion that continue to plague the UK economy.

Potential Pensions Reforms

Though no official changes have been announced yet, there is ongoing discussion within Labour about reforms to pension tax relief. With an eye on reducing wealth inequality, the government may reduce the annual allowance or reinstate the lifetime allowance cap, which the previous Conservative administration abolished. These potential reforms primarily target higher earners and could have significant implications for retirement planning.

Lifetime Pension Contribution Allowance by year (it should be noted that this allowance was abolished in 2024)

The Autumn Budget 2024 is poised to bring about substantial reforms to tackle the UK’s fiscal challenges while redistributing wealth. Investors and businesses will face higher taxes, particularly in sectors like energy, property, and education. With Labour focusing on economic fairness, the abolition of the non-domicile status, new multinational tax rules, and increases in the Energy Profits Levy are just the beginning of what could be a far-reaching overhaul of the UK tax landscape. Investors would do well to prepare for these changes, which will reshape financial strategies across multiple sectors.

Subscribing to De Pointe Research will help you navigate these developments, offering detailed insights and strategies to stay ahead of these substantial policy shifts.