Budget 2024 Insights

Major Highlights from the 2024 Autumn Budget

This week, on 30th October, the Labour Party unveiled its first budget since coming into power.

Chancellor Rachel Reeves introduced a budget in the Autumn Statement covering a wide array of topics, including taxation, spending, wages, and pensions.

Many of the budget’s elements are likely to have a direct impact on you and your finances.

Minimum Wage Raised to £12.21

The Chancellor confirmed that the minimum wage for those aged 21 and above will increase by 6.7% starting in April 2025.

Rising from £11.44 to £12.21, this equates to an annual salary of £22,222 for an employee working 35 hours per week.

The Treasury stated that the minimum wage increase for those under 21 is the largest on record. This also marks the first step towards establishing a unified minimum wage standard for all adults.

Employer National Insurance Contribution to Rise by 1.2%

The Chancellor announced an increase in the amount of National Insurance Contributions paid by employers.

From April 2025, this rate will rise to 15%.

Additionally, the threshold for employer contributions will lower from £9,100 per year to £5,000.

This measure is projected to generate £25 billion annually for the government.

Increase in Capital Gains Tax

The Treasury announced that both the lower and higher rates of Capital Gains Tax will be increased.

The lower rate will go from 10% to 18%, and the higher rate will increase from 20% to 24%.

The current rates will remain until April 2025.

This is expected to raise £2.5 billion for the Labour government.

Personal Income Tax Threshold Freeze to End

Since 2022, the personal income tax threshold has been frozen at £12,570.

This means that income over this threshold is subject to various levels of income tax.

The freeze on the income tax threshold implies that, as wages rise, individuals will end up paying more income tax.

To address this, the Treasury plans to adjust the personal income tax threshold in line with inflation starting from the 2028–2029 tax year.

Bus Fares to Rise in Multiple Regions

The Chancellor confirmed that single bus fares across multiple regions will increase from December 2025.

Currently capped at £2 per journey, the price will rise to £3.

It is reported that the fare increase will generate £650 million for transport departments across the country to improve connectivity in urban areas.

UK VAT

VAT (Value Added Tax) is a tax applied to most goods and services sold in the UK. Different countries have varying VAT rules.

The current VAT registration threshold in the UK is £90,000. Once your turnover exceeds this in any 12-month period, VAT registration is mandatory.

Businesses that don’t meet this threshold can still opt to register voluntarily, which includes regular VAT returns and payment of any due VAT.

UK VAT Rates

There are three main VAT rates in the UK:

Standard rate: 20% – applies to most goods and services.

Reduced rate: 5% – applies to certain products like children’s car seats and solar panels.

Zero rate: Some goods and services, such as healthcare, education, and financial services, are VAT-exempt.

Advantages of Registering for UK VAT

Once registered, your business will be issued a VAT number, which enhances credibility.

Simplifies cross-border transactions, especially if both businesses are VAT-registered, avoiding complex tax procedures.

Enhances efficiency and transparency in financial management.

Improves cash flow management, potentially assisting with short-term liquidity needs.

How We Can Help?

Whether you are registering for VAT voluntarily or due to mandatory requirements, our team is here to assist.

If you are an overseas company, our international team can provide multilingual support, so you don’t need to worry about language barriers.

In addition to VAT registration, we offer ongoing filing services in line with the respective country’s requirements.

Reform UK Proposes “Employer Immigration Tax”

Recently, the UK Reform Party proposed the introduction of an “Employer Immigration Tax” to encourage UK businesses to reduce their reliance on “cheap labour”.

The plan requires most employers to pay an additional 20% National Insurance when hiring overseas labour.

Healthcare workers, caregivers, and employers with fewer than five employees will be exempt.

The proposal has sparked significant public debate, although it has not yet been adopted or scheduled for consideration.

Which Businesses or Individuals Are Likely to Be Investigated?

Self-Employed

Currently, a significant proportion of tax investigations in the UK target the self-employed.

Unlike other businesses, the self-employed must report their annual financial status through self-assessment tax returns.

Typically, they do not have a dedicated accounting team, meaning discrepancies may arise between their tax returns and HMRC’s records.

Furthermore, late payments or random checks can increase the likelihood of the self-employed being investigated.

Multinational Companies

Multinational companies, often with operations in other countries, have become a primary focus for HMRC in recent years.

HMRC currently has a substantial team dedicated to international tax issues for multinational corporations, despite longer investigation periods.

Due to their presence in multiple jurisdictions, these companies can allocate financial expenditures across different countries, reducing taxable income in the UK.

As a result, multinational companies are more likely to trigger UK tax investigations.

Primark Clothing Supplier Fined for Tax Evasion

A Leicester-based clothing factory supplies garments to chains such as Primark and New Look.

The factory established a complex network of shell companies to shift VAT liabilities and evade taxes without the knowledge of these brands.

An investigation following a surprise visit by HMRC found that the factory had evaded £1.3 million in VAT.

Ultimately, the two main culprits were sentenced to 3-5 years in prison, and an accomplice was sentenced to 2 years in prison and required to complete 300 hours of community service.

NAO says taxpayers collectively spent 798 years waiting to speak to HMRC

A report from the UK’s National Audit Office shows that HMRC’s telephone communication service is below expected standards.

In the last financial year (2022/23), taxpayers waited an average of 23 minutes, compared to 5 minutes five years ago.

In reality, it’s even more difficult to communicate with HMRC advisers, with calls being automatically disconnected.

NAO hopes for a more practical service plan from HMRC to alleviate taxpayer dissatisfaction.

Platforms and Sellers Affected

Currently, HMRC has access to sellers’ information on online platforms and collects their sales data.

This includes platforms such as Etsy, Vinted, eBay, as well as media platforms like Instagram and OnlyFans, which need to collect sales and income information from sellers and influencers to share with HMRC.

Additionally, platforms providing services such as Uber, Deliveroo, and Airbnb must also share data for any services receiving payments.

So far, online sellers have faced strict internal scrutiny by HMRC and entered into tax investigations.

Submitting Tax Returns

Since HMRC requested all sellers’ sales records from online e-commerce platforms, income from online sales will be fully exposed.

This means that all sales data becomes extremely transparent, and you need to understand everything about income tax reporting to avoid triggering a tax investigation.

For individual online sellers, if annual sales exceed £90,000, additional VAT registration is required.

If you are an online media person and receive “gifts” from fans or brands, it counts as income, with the same registration threshold applying.

Penalties

Firstly, once HMRC initiates a tax investigation into the store, it requests all online sales data and tax evidence. HMRC has the authority to request that the platform close the store until evidence is provided.

Secondly, during the tax investigation, online selling platforms have “joint responsibility” and are required to cooperate in providing all seller information.

When HMRC confirms tax evasion by the store, it will face a penalty of 100% of the tax owed.

Serious cases will also face prosecution and unlimited fines.

HMRC has revealed that a highly rated restaurant in Manchester owes hundreds of thousands of pounds in taxes

HMRC said one of Manchester’s highly rated restaurants owes hundreds of thousands of pounds in taxes.

Moreover, businesses and individuals in Greater Manchester will be listed as “deliberate tax defaulters” once their tax debts exceed £25,000.

This includes nearly ten businesses or individuals such as soft drink wholesalers and real estate companies.

Currently, HMRC has made this public and is awaiting further leads to recover the debts as much as possible.

Free childcare applications for a new age group will open this Sunday

Starting this Sunday, working parents in England with children aged nine months can apply for up to 15 hours of free childcare per week.

Applications for this age group will be granted from September.

Starting September 2025, once eligible, all working parents with children under five will be able to apply for up to 30 hours of free childcare per week.

This scheme currently only applies to the England region, while other regions can check local tax policies.