Autumn Budget 2024 – key tax announcements

The 2024 Autumn Budget has been one of the most anticipated fiscal events in recent years. Not only is it a post-election Budget – the Labour Party’s first Budget in almost fifteen years – but the length of the period that has elapsed since the election, the Government’s discovery of a £22bn “black hole” in the public finances, and the broad commitments contained in Labour’s manifesto have all contributed to a lengthy period of intense speculation.

Recent confirmation from the Chancellor that tax increases were a certainty, combined with the Government’s repeated commitment not to increase the rate of income tax, national insurance contributions or VAT (in the context of not raising taxes on “working people”) has meant that speculation has focused on a few key areas. As such, many of the key announcements set out below were widely anticipated.

A summary of the principal changes in today’s Budget announcements, both headline-grabbing announcements and technical developments, follows.

Key tax increases – an overview

• Increase in the main rates of capital gains tax with effect from today, 30 October 2024;
• Phased increases in the rate of capital gains tax applicable to disposals qualifying for BADR, starting from 6 April 2025;
• Increase in the rate of capital gains tax applying to carried interest, from 6 April 2025, and an announcement of further reform;
• 1.2% increase in the rate of employer NICs from 6 April 2025;
• Confirmation of the reform of taxation for non-domiciled individuals, in relation to income, capital gains, and inheritance tax;
• Amendments to reliefs and exemptions applicable to inheritance tax;
• Publication of the Corporate Tax Roadmap.

Key measures relating to taxes on businesses

Corporate tax roadmap

The Government today published its Corporate Tax Roadmap, with the objective of providing stability and certainty to business. It contains a number of commitments, aimed at providing predictability for business, as outlined below.

Corporation tax rate

The headline rate of corporation tax will be capped at 25% for this Parliament.

International developments will be monitored, to ensure that the UK regime remains competitive.

The small profits rate and marginal relief will be maintained at their current rates and threshold.

Corporation Tax base

The Government has given some broad commitments to maintaining key features of the Corporation Tax base and the key features of the loss relief regime. It has confirmed that it will not restrict the deductibility of borrowing costs in light of full expensing.

It has also committed to keep in place various structural elements of the UK’s regime which contribute to its competitiveness, including the exemption for disposal of substantial shareholdings, dividend exemption, limited withholding taxes for outbound payments and broad treaty network.

Bank taxes

The bank tax regime will be kept under review.

Capital allowances

Full expensing will be retained for this Parliament, with other core features of the capital allowances regime also being retained.

Consideration will be given to simplification of the capital allowances regime.

The tax treatment of predevelopment costs will be considered, including discussion with affected stakeholders, in light of the decision in Gunfleet Sands and others v HMRC.

The Government will explore an extension of full expensing to assets that are brought for leasing or hiring.

R&D reliefs

The rates for the merged R&D Expenditure Credit Scheme and the Enhanced Support for R&D Intensive SMEs will be maintained.

The administration of R&D reliefs will be enhanced, by establishing the R&D expert advisory panel and by the launch of an R&D disclosure facility by the end of 2024.

A consultation will be undertaken on widening the use of advance clearances in relation to R&D reliefs.

Patent Box and intangibles

The UK’s Patent Box and intangible fixed assets regimes will be maintained.

Other Corporation Tax reliefs

An Audio-Visual Expenditure Credit and a Video Game Expenditure Credit will be maintained.

A consultation to review the effectiveness of Land Remediation Relief will be launched.

International Corporation Tax

Further consultation will be undertaken on reforms to the UK rules for transfer pricing, permanent establishment and diverted profits tax, including the potential removal of UK to UK transfer pricing.

There will be a consultation on further changes to transfer pricing legislation, including potentially lowering the thresholds for exemption and introducing a requirement for multinationals to report cross-border related party transactions to HMRC.

The transfer pricing treatment of cost contribution arrangements will be reviewed.

The Government will continue to support Pillar One and will repeal the UK digital services tax once Pillar One is in place.

The Pillar Two rules will be amended to keep pace with developments at OECD level.

Consideration will be given to further simplification of the UK’s rules in relation to cross-border activities, in light of Pillar Two.

Tax Administration

A new process will be developed and consulted on, aimed at giving investors in major projects increased advance certainty.

An update will be published in the spring on how the Government will take forward its ambitions of modernising the technology which the corporation tax system relies upon.

Co-operative compliance and the Customer Compliance Manager model will continue, with further consideration being given to how to provide greater taxpayer certainty and improve the customer experience, whilst continuing to tackle avoidance and aggressive planning.  

Increase in the rate of employer national insurance contributions and increase in employment allowance

As noted above, the Labour Party’s manifesto contained a commitment not to increase income tax, national insurance contributions (NICs) or VAT. That this commitment was made in the context of not increasing taxes on “working people” led to general speculation of an increase in the rate of employer NICs. An increase of one or two percentage points had been widely anticipated.

The Government has announced a 1.2% increase in the rate of employer NICs (secondary Class 1 NICs), from the current 13.8% rate to 15%. The Class 1A and Class 1B employer rates will also increase in line with this. The rate change will be applicable from and including 6 April 2025.

The threshold at which employer NICs become payable has also been decreased. Currently, employer NICs apply to earnings above the secondary threshold, which for the current tax year in relation the majority of classes of employee is £9,100 per year). This has been reduced to £5,000 per year, with effect from 6 April 2025. The threshold will be maintained at this level until 5 April 2028, at which point it will be increased in line with CPI.

In order to mitigate the impact of the above, in particular on small businesses, the employment allowance has been increased from £5,000 per year to £10,500 per year.

Energy profits levy (EPL)

Reforms to the EPL, initially introduced in May 2022 to tax the extraordinary profits of oil and gas companies operating in the UK or the UK Continental Shelf, have today been announced.

The reforms will increase the rate of EPL by 3%, to 38%, extend the end date of the EPL to 31 March 2030 and remove the EPL Investment Allowance. Additionally, the rate of Decarbonisation Investment Allowance will reduce to 66% to maintain its cash value following the EPL rate increase. A consultation will be published in early 2025 which will consider how the Government will respond to price shocks once the EPL ends.

Further detail on the reforms announced today can be found in our article here: UK Budget: Changes to Oil and Gas Tax Regime

Pillar Two

The Government has today confirmed that it will introduce legislation in Finance Bill 2024-25 to implement the undertaxed profits rule, the “backstop” mechanism within the Pillar Two rules, to take effect for accounting periods beginning on or after 31 December 2024. 

The Government has also announced today that it will make amendments to the existing charging provisions of Pillar Two, relating to multinational top-up tax and domestic top-up tax. This will include the introduction of the transitional country-by-country reporting safe harbour anti-arbitrage rule, amended from the previous draft in order to reflect consultation responses. A number of other amendments have been made, either reflecting consultation responses or in order to ensure that the UK legislation is consistent with the OECD position, as it continues to evolve.

Key measures relating to taxes on individuals

Increase in the rate of capital gains tax (CGT)

Amongst the most widely anticipated tax increases has been in relation to CGT. An increase had seemed a certainty, with only the rate of the increase and the effective date being the remaining unknowns.

It has been confirmed that the main rates of CGT will be increased from 10% to 18% (for any gains falling within an individual’s unused basic rate band), and from 20% to 24% (for higher rate taxpayers), with effect for disposals on and after 30 October 2024.

In accordance with Rachel Reeves’ earlier comments, gains on disposals of residential property will continue to be subject to the rate of 18% or 24%, as applicable.

As anticipated, certain anti-forestalling measures have been introduced to prevent taxpayers from benefitting from the lower rates by implementing certain structures which seek to “lock in” those rates ahead of an increase.

Change in the rate of CGT applicable to Business Asset Disposal Relief (BADR)

It has been announced that for disposals made on or after 6 April 2025, the rate of CGT for Business Asset Disposal Relief will increase from 10% to 14%. For disposals made on or after 6 April 2026, the rate will increase from 14% to 18%. The lifetime limit will be maintained at £1m.

Anti-forestalling measures will also be introduced in relation to certain structures which seek to “lock in” the lower rates.

Carried interest reform

One of the Labour Party’s election commitments was to reform the taxation of carried interest. In the lead up to the election and in their manifesto, the Party’s public comments tended to refer to the “appropriate” tax treatment of “private equity bonuses”. As such, expectations at the time were that carried interest could be taxed at the additional rate of income tax (45%), and subject to NICs, representing a significant increase from the current 28% rate.

Since the election, there has been an increasing expectation of a compromise position. HM Treasury released a Call for Evidence at the end of July and the Government has since been closely consulting key stakeholders. In early October, Rachel Reeves said that the Government was approaching carried interest reform “in a responsible way”, noting the need to ensure that such reform does not reduce investment in Britain.

This has culminated in the Government announcing today that the CGT rate for carried interest will be increased to a flat rate of 32% from April 2025. This acts as an interim step in the run up to April 2026, where the tax regime will be brought within the Income Tax Framework, with a 72.5% multiplier applied to qualifying carried interest that is brought into charge.

The Government has also published a summary of responses to the call for evidence earlier this year, which includes next steps and a consultation on introducing further conditions for access to the regime.

Change in rate applicable for, and reduction in the lifetime limit for, Investors’ Relief

The rate of CGT applicable to Investors’ Relief will increase to 14% from 6 April 2025 and to 18% from 6 April 2026. Legislation will be introduced in the Finance Bill 2024-25 which is set to reduce the Investors’ Relief lifetime limit from £10m to £1m, for Investors’ Relief qualifying disposals made on or after 30 October 2024. This will affect those individuals disposing of ordinary shares in an unlisted trading company where certain criteria are met.

Changes to inheritance tax reliefs and exemptions

It had been widely expected that certain reliefs and exemptions from inheritance tax would be made less generous. Speculation has generally focused on agricultural property relief (APR) and business property relief (BPR), as well as unused pension funds, which are currently outside the scope of inheritance tax.

It has been announced that:

• From 6 April 2027, most unused pension funds and death benefits will be included within the value of a person’s estate for inheritance tax purposes. Pension scheme administrators will be liable for reporting and paying any inheritance tax due on pensions;
  
  The Government has published a consultation on the processes required to implement these measures.
   
• From 6 April 2026, the existing 100% rates of relief under APR and BPR will apply only for the first £1m of qualifying business and agricultural property combined. Once the £1m threshold is exceeded, the rate of relief will be reduced to 50%;
• BPR will only be available at a rate of 50% in relation to qualifying holdings of shares listed on AIM, and shares which are designated as “not listed” on the markets of recognised stock exchanges;
  
  The Government will publish a consultation on the proposed changes to APR and BPR by early 2025.

In addition, the Government has announced it will legislate to extend the scope of APR to environmental land management from 6 April 2025. APR will be available for land managed under an environmental agreement with, or on behalf of, the UK Government, devolved Governments, public bodies, local authorities, or approved responsible bodies.

It has been announced that the nil rate band (£325,000), the residence nil-rate band (£175,000) and the amount at which the residence nil-rate band taper begins (£2m) will all be maintained at their current levels until 5 April 2030 (extended from 5 April 2028). Unused nil-rate bands will continue to be transferrable to a surviving spouse or civil partner (meaning that the surviving spouse’s estate on death can benefit from a nil-rate band of up to £1m.  

Reform of tax regime for non-domiciled individuals

At the March Budget earlier this year, the Conservative Government announced a reform of the tax regime for non-domiciled individuals. The proposals were broadly twofold:

• The replacement of the remittance basis of taxation with a “four-year foreign income and gains regime”.;
• The implementation of a new “residence based” regime for inheritance tax to replace the current domicile and deemed-domicile based regime.

The Government had maintained that it would implement the previous Government’s regime, with amendments to make certain transitional reliefs less beneficial. There had been a number of reports in the press that the Government was re-considering the proposed reforms due to the potential neutral or even negative impact on revenue.

However, it has been confirmed that, with effect from 6 April 2025, the Government will (i) introduce a “four-year foreign income and gains regime” (4-year FIG regime) to replace the remittance basis of taxation, broadly in line with the previous Government’s proposals and (ii) implement a new “residence-based” regime for inheritance tax.

A detailed technical note and draft legislation have been published as part of the Autumn Budget publications. An overview of the announcements is set out below.

Income and capital gains tax

It has been confirmed that the new 4-year FIG regime will replace the remittance basis of taxation from 6 April 2025. Individuals opting into the new regime will qualify for 100% UK tax relief on foreign income and gains arising during their first four years of UK tax residence. The regime will only be available to those who have not been UK tax resident for the ten tax years immediately prior to their arrival.

Individuals who previously used the remittance basis of taxation, but do not qualify for the new regime (or who do not claim to use it) will continue to pay tax on remittances of foreign income and gains which arose prior to 6 April 2025. Protections from UK tax on foreign income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the new regime.

In line with the Labour Party’s previous statements, there will be no 50% reduction for remittances of foreign income during the first tax year of the new regime, for current remittance basis users who cannot benefit from the new 4-year FIG regime from 6 April 2025.

However, the Government has announced that it will extend the Temporary Repatriation Facility, (TRF) to encourage impacted individuals to bring foreign income and gains arising prior to 6 April 2025 to the UK at a reduced rate. The TRF will be extended to three years, and its scope will be expanded to include distributions from certain offshore structures. In addition, the complex mixed funds rules will be simplified in order to encourage individuals to bring their overseas foreign income and gains to the UK. For tax years 2025/2026 and 2026/2027 amounts remitted subject to the TRF will be taxed at a rate of 12%, rising to 15% in tax year 2027/2028.

For capital gains tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 where certain conditions are met in relation to the disposal.

Overseas Workday Relief will be retained and reformed. The need to keep the income offshore will be removed, the period that employees can benefit from the relief will be extended from three to four years, and there will be a limit on the amount claimed annually. This will be capped at the lower of £300,000 or 30% of the employee’s net employment income.

Inheritance tax

Under current rules, assets situated outside the UK are not within scope of UK inheritance tax for individuals who are neither UK domiciled nor UK deemed domiciled. The Government has confirmed that, from 6 April 2025, the test for whether non-UK situated assets are within scope of inheritance tax will be whether an individual has been resident in the UK for at least ten out of the previous twenty years immediately preceding the tax year in which the chargeable event (for example, death) arises.

The period in which an individual remains in scope of inheritance tax after departing the UK will be reduced where they have only been resident for between ten and nineteen years.

Personal tax offshore anti-avoidance rules

The Government has announced a Call for Evidence to understand and identify areas where certain personal tax offshore anti-avoidance rules could be modernised, improved or updated. This includes:

• The settlements legislation (which relates to income of a settlement, such as a trust, which is treated as arising to the settlor of that settlement, or certain individuals closely related to the settlor);
• The transfer of assets abroad regime (which broadly seeks to attribute income arising to individuals, entities or structures overseas to UK resident individuals who can enjoy or benefit from that income or receives sums relating to that income, in certain circumstances where there is a link between that income and an asset that the individual has transferred); and
• Capital gains tax legislation which seeks to attribute capital gains of overseas entities or settlements such as trusts to individuals resident in the UK where there is a particular connection between the individual and the overseas entity or structure.

The Call for Evidence also welcomes comments on similar anti-avoidance measures outside the specific regimes mentioned above. The consultation states that it is not anticipated that any changes to the offshore anti-avoidance legislation will be introduced before tax year 2026/2027.

The Call for Evidence closes on 19 February 2025.

British ISA

The government has confirmed it will not go ahead with the previous government’s proposals to introduce a “British ISA”.

Income tax and national insurance contributions thresholds

Today, the Government announced that they will not extend the freeze to income tax and NICs thresholds, so that, from April 2028, these thresholds will be increased in line with inflation.

Simplifying the taxation of offshore interest

The Government has also published a consultation document to tackle challenges arising from the mismatch of information on offshore interest being provided on a calendar year basis, rather than a UK tax year basis. The consultation is seeking views on options to address this mismatch, including changes to the rules so that individuals are taxed on the non-UK interest arising in the year ended 31 December that ends in the tax year. It should also be noted that the removal of the remittance basis means more people will be impacted by these issues.

Key indirect tax measures

VAT on private school fees

One of Labour’s flagship manifesto policies was the removal of the VAT exemption for private school fees. A policy paper and draft legislation were released in July, along with further guidance in the following months.

The Government had maintained that the exemption would be removed for fees paid for terms beginning on or after 1 January 2025. Bodies for taxation professionals and private schools have been making representations to the Government to extend this date, to provide schools with time to establish the appropriate tax reporting apparatus.

However, it has been announced that, from 1 January 2025, all education and boarding services provided by a private school or connected person will be subject to VAT at the standard rate of 20%. Pre-payments of fees or boarding services on or after 29 July 2024 relating to terms starting on or after 1 January 2025 will also be chargeable to VAT at the standard rate of 20%.

Stamp duty land tax (SDLT)

The Government will introduce legislation in Finance Bill 2024-25 to increase the higher rates of SDLT payable on purchases of additional residential properties by individuals and purchases of residential properties by companies from 3 to 5 percentage points above the standard residential rates of SDLT. 

The single rate of SDLT payable by companies and other non-natural persons when purchasing residential properties worth more than £500,000 will increase from 15% to 17%.

These changes will impact transactions with an effective date on or after 31 October 2024.

Stamp Duty and Stamp Duty Reserve Tax – Financial Market Infrastructure (FMI) sandbox and exemption for Private Intermittent Securities and Capital Exchange System (PISCES)

The Government has announced that it will introduce legislation in Finance Bill 2024-25 enabling HM Treasury to make stamp duty and SDRT changes, by Statutory Instrument, in relation to FMI sandboxes established under the Financial Services and Markets Act 2023. The power will be used to provide an exemption from stamp duty and SDRT for PISCES transactions. PISCES is a new type of trading platform that will allow private companies to have their shares traded intermittently. The Statutory Instrument will be introduced to a similar timeline to the legislation establishing the PISCES framework.

Other key tax measures

Employee Ownership Trusts and Employee Benefit Trusts

The Government today announced that it will introduce legislation in Finance Bill 2024-25 to reform the taxation of Employee Ownership Trusts and Employee Benefit Trusts. The aim is to ensure that the regimes remain focused on encouraging employee ownership and rewarding employees and to prevent opportunities for abuse.

Changes will be made to the conditions for obtaining relief from capital gains tax on disposal of a controlling shareholding in a company to the trustees of an Employee Ownership Trust. These changes will ensure that former owners cannot retain control of the company post-sale by retaining control of the Employee Ownership Trust, requires that the trustees be UK resident as a single body of persons and require that reasonable steps are taken to ensure that the consideration paid on disposal of shares to the trustee does not exceed market value.

Three changes will also be made to the conditions that need to be met for a transfer into an Employee Benefit Trust to be exempt from inheritance tax.  These will ensure that the restrictions on connected persons benefiting from an EBT must apply for the lifetime of the trust and require the shares to have been held for two years prior to settlement into the EBT.  Finally, it will be necessary that no more than 25% of employees who can receive income payments are connected to the participator.

Research and development small or medium-sized enterprises rules

At Spring Budget 2023, the then Chancellor announced enhanced support for R&D intensive small or medium-sized businesses. It was announced today that the implementing legislation will be amended, so that the intensity calculation takes account of any expenditure of the company for which it is entitled to Research and Development Expenditure Credit, as had originally been intended.  This measure will be retrospective and will take effect from 1 April 2023. 

Reserved Investor Fund (RIF) and related provisions

The Government has announced that they will proceed with the introduction of the Reserved Investor Fund (Contractual Scheme) (RIF). They will also make minor amendments to the tax rules in respect of Co-ownership Authorised Contractual Schemes (CoACS). A RIF is designed to complement and enhance the UK’s existing funds regime by meeting industry demand for a UK-based unauthorised contractual scheme with lower costs and more flexibility than the existing authorised contractual scheme. The RIF will be open to professional and institutional investors. It is expected to be particularly attractive for investment in commercial real estate.

Gambling duty reform

It was reported earlier in October that the Treasury has been considering significant increases to certain taxes levied on the gambling sector. No rate increases were announced today.

However, the Government has announced it will publish later this year a consultation on proposals to bring remote gambling (gambling offered over the internet, telephone, TV and radio) into a single tax, instead of the “three tax” structure currently used. This is in line with statements made by the previous Chancellor, Jeremy Hunt, last year.

In addition, the Gross Gaming Yield bandings for gaming duty (payable by bricks and mortar casinos) will be frozen from 1 April 2025 until 31 March 2026. These bandings generally increase with inflation.

Loans to participators

The Government has announced that it will include legislation in Finance Bill 2024-25 to prevent avoidance of the loans to participators charge (section 455 Corporation Tax Act 2010) by ensuring that the targeted anti-avoidance rule remains robust and effective against avoidance.

This change is in response to arrangements of which the Government has become aware, involving the use of a group of companies or amongst associated companies, so that new loans are made and then repaid in a chain.

Legislation will be introduced in Finance Bill 2024-25 to ensure that where the targeted anti-avoidance rule applies, tax is payable whether or not there has apparently been a repayment, or a repayment is subsequently made.

Consultation on Land Remediation Relief

Today, the Government announced that it will launch a consultation (to be held in Spring 2025) to review the effectiveness of Land Remediation Relief, considering whether the relief is still meeting its objectives and evaluating its value for money. Land Remediation Relief is a relief from corporation tax only. It provides a deduction of 100%, plus an additional deduction of 50%, for qualifying expenditure incurred by companies in cleaning land acquired from a third party in a contaminated state.

Offshore Receipts in Respect of Intangible Property (ORIP) repeal

The Government has confirmed that it will repeal the ORIP rules in Finance Bill 2024-25, in respect of income arising on or after 31 December 2024. These rules are regarded as unnecessary, in light of the Pillar Two rules which will more comprehensively discourage the multinational tax-planning arrangements that ORIP sought to counter.

Abolition of Furnished Holiday Lets regime

As announced in July 2024, the furnished holiday lets regime will be abolished. Instead, income and gains from a furnished holiday let will form part of the person’s UK or overseas property business. This will take effect on or after 6 April 2025 for income tax and capital gains tax and from 1 April 2025 for corporation tax.

Alternative finance

Legislation will be introduced in Finance Bill 2024-25 which will make changes to certain alternative finance tax rules for capital gains tax, corporation tax, income tax and annual tax on enveloped dwellings. The principal aim is to ensure that the tax consequences are the same as for conventional financing arrangements.

Liquidation of LLPs 

It was announced that the Government will introduce legislation to change the capital gains rules that apply to the liquidation of an LLP, from 30 October 2024. The measure is intended to tackle an avoidance scheme, by ensuring that where a member of an LLP has contributed assets to the LLP, chargeable gains that accrue up to the time of the contribution are charged to tax when the LLP is liquidated and the assets are disposed of to the member, or a person connected to them.

Charity tax compliance

The Government has published a summary of responses to a consultation on charities tax compliance released in Spring 2023. As part of the summary of responses, the Government has announced it will legislate in a future Finance Bill to prevent abuse of certain charity tax rules by strengthening some existing anti-abuse rules so that only the intended tax relief is provided.

Draft legislation will be published for consultation this year, with changes to take effect from April 2026 to allow time for adjustment.

Additional tax relief for visual effects (VFX) and administrative measures relating to Audio-Visual Expenditure Credits (AVEC) and Video Games Expenditure Credits (VGEC)

The Government has announced today that companies incurring UK visual effects (VFX) costs on films or high-end television productions that qualify for the AVEC, will be able to claim an enhanced 39% rate of AVEC (an increase from 34%). Further, the AVEC’s 80% cap on qualifying costs will be removed for UK VFX costs. The changes will take effect from 1 April 2025, for expenditure incurred on or after 1 January 2025.

In addition, the Government will introduce legislation in the Finance Bill 2024-5 to enact small administrative measure changes to claiming AVEC or VGEC, including in relation to the British certification condition, the treatment of unpaid amounts and regulation-making procedure. These will take effect from the date of Royal Assent to the Finance Bill 2024-25.

Extending first-year allowances for zero-emission cars and electric vehicle charge-points

It was announced today that the Government will introduce legislation in the Finance Bill 2024-25 to extend the 100% first-year allowances for zero-emission cars and electric vehicle charge-points until 31 March 2026, for corporation tax, and 5 April 2026, for income tax. This aims to support the UK’s transition to cleaner vehicles and is part of the Government’s wider commitment to the UK achieving net zero greenhouse gas emissions by 2050.

Taxation of company cars – the appropriate percentage for tax years 2028/2029 and 2029/2030

In relation to company car tax rates for forthcoming tax years, the Government has announced that the appropriate percentages for zero emission and electric vehicles will increase by 2% per year in 2028/2029 and 2029/2030, increasing to an appropriate percentage of 9% in tax year 2029/2030.   

Appropriate percentages for all cars with emissions of 1 to 50g of CO2 per kilometre, including hybrid vehicles, will rise to 18% in tax year 2028/2029 and 19% in tax year 2029/2030.    

Appropriate percentages for all other vehicle bands will increase by 1% per year in tax years 2028/2029 and 2029/2030. This will be to a maximum appropriate percentage of 38% for tax year 2028/2029 and 39% for tax year 2029/2030.  

Tax administration, compliance and reporting

A consultation on the implementation of electronic invoicing (e-invoicing) in the UK

The Government will publish a consultation in early 2025 to explore electronic invoicing and how it can establish standards, increase adoption, and support businesses.

HMRC customer service improvements and digital roadmap

The Government has announced that it will invest in improving HMRC’s customer service. This includes ensuring that HMRC has sufficient resources to meet performance targets, including answering 85% of phone calls where customers want to speak to an advisor. There is an intention to transform HMRC into a digital-first organisation with a Digital Transformation Roadmap to be published in Spring 2025. This includes investing in the modernisation and reform of HMRC’s internal systems and the way that taxpayers interact with HMRC, such as through the HMRC app.

Tax policy simplification

The Government has announced that it will shortly begin engaging with stakeholders with a view to improving the tax policy process. As previously, the Government has confirmed that it is committed to a single major fiscal event per year. The Government intends to simplify the tax system, as part of three strategic priorities: closing the tax gap, modernisation and reform, and improving customer service.

This will include, in Spring 2025, announcing a package of measures to simplify tax administration and improve the customer experience with a focus on reducing burdens on small businesses. The Government will meet with stakeholders to discuss the above.

Investment in tax compliance

As previously announced by Rachel Reeves during the Labour Party conference speech, 5,000 additional tax compliance officers will be recruited. In addition, funding will be provided for 1,800 debt management staff. The Government has also announced an investment of £12 million to acquire further credit reference agency data to enable HMRC to better target its debt collection activities.

Loan charge review      

The Government will commission an independent review of the Loan Charge in order to conclude the matter. Further details concerning the review will be set out in due course.

Crypto Asset Reporting Framework (CARF) and Common Reporting Standard

The Government has published a summary of responses to the consultation, ‘Crypto asset reporting framework, Common Reporting Standard amendments, and seeking views on extension to domestic reporting’.

It has been announced that CARF and amendments to the CRS will be implemented in the UK from 1 January 2026.

The Government will introduce legislation in Finance Bill 2024-25 to provide the Treasury with the power to make the CARF regulations, which will be made in time for implementation on 1 January 2026.

Tackling tax non-compliance in the umbrella company market

The Government will introduce legislation in a future Finance Bill to make agencies responsible for accounting for PAYE on payments made to workers that are supplied using umbrella companies. Where there is no agency, the responsibility for accounting for PAYE will fall on the end client business. Draft legislation will be published in due course. These changes will take effect from April 2026.

New ways to tackle tax non-compliance

The Government has published a consultation on reforming HMRC’s correction powers, exploring changes to HMRC’s existing powers and processes, and a potential new power to require taxpayers to correct mistakes themselves.

Powers, penalties and safeguards

The Government has published a summary of responses to the call for evidence in “The Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards” which was published this year. The Call for Evidence was open until 9 May 2024 and covered opportunities to reform:

1. HMRC’s powers that enable it to check the accuracy of information submitted to it and to address non-compliance by taxpayers in terms of meeting their tax obligations;
2. The financial penalties that can apply when taxpayers fail to meet their tax obligations;
3. The safeguards that ensure taxpayers and intermediaries are treated fairly and in accordance with the law.

The Government has confirmed it will increase the late payment interest rate charged by HMRC on unpaid tax liabilities by 1.5 percentage points, with this measure taking effect from 6 April 2025.