Chancellor Reeves announces Autumn Budget date and other policy changes

As the UK started to feel summery, Chancellor Rachel Reeves remained cool-headed at the podium of the House of Commons, announcing that the Autumn Budget date will come later than most anticipated, naming the date as Wednesday 30 October 2024 to be accompanied by a full fiscal and economic forecast from the Office for Budget Responsibility.

Chancellor Reeves used her speech to signpost a number of tax policy changes and earmarked start dates, focusing on revenue raising tax measures included in the Labour manifesto published last month, estimated to raise £8.55 billion per annum by 2028/29. If difficult decisions to meet the fiscal rules, across spending, welfare and tax are expected in the autumn, the Chancellor explicitly repeated manifesto promises not to increase taxes on working people, stating that this means no increases to NICs, the basic/higher/additional rates of income tax, or VAT.

It’s no surprise that Monday’s announcement included further details on closing the tax gap including “closing further non-dom tax loopholes”, together expected to raise £5.23 billion. On the tax gap, the government has started the process to hire around 5,000 additional staff to ramp up HMRC capabilities to recover more tax revenues whilst also investing in technology infrastructure bringing up productivity and improving customer experience. The non-UK domiciled individuals regime will be replaced with new rules to apply to individuals for their first four tax years of residence in the UK, provided they have been non-UK resident in the previous ten years. The changes take effect from 6 April 2025. Labour’s plans are very similar to those set out by the Conservatives in the Spring Budget 2024, though Labour have decided not to proceed with one aspect of the transitional rules  which would have applied a 50% discount in the first year and intend to confirm how other aspects of the transitional rules will apply at a later date. Labour will also proceed with the inheritance tax aspects of the Conservative plans, though, unlike the Conservatives, Labour intend to change the inheritance tax rules to bring non-UK assets held in existing trusts within the scope of UK inheritance tax.

The remaining £3.32 billion included in the Labour manifesto came from pledges relating to specific tax policy measures for which we received more details on Monday in three of the policy areas:

• VAT on Private School Fees & Removing the Charitable Rates Relief for Private Schools: From 1 January 2025, all education and vocational training supplied by a private school (or a connected person) will be subject to VAT at the standard rate of 20%. Boarding services provided by a private school (or a connected person) will also be subject to VAT at 20%. Additionally, it has also been announced that fees invoiced or paid on or after 29 July 2024 that relate to the school terms after 1 January 2025 will be subject to the standard rate of VAT at the beginning of that term. School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment. The technical note also includes further information on the government’s intention to remove the business rates charitable rates relief for private schools in England which will now take effect from April 2025, subject to Parliamentary process.

• Energy Profits Levy: Whilst not unexpected, the announcements regarding the energy profit levy and notably the potential changes to capital allowances without giving any detail will create uncertainty. The government did confirm that the reformed regime applying from 1 November 2024 will include the EPL’s 3% increase with a headline tax rate for the sector reaching 78% and the extension by one year to 31 March 2030.

• Pillar Two: Draft legislation was published to amend the UK’s implementation of the Pillar Two transitional country-by-country reporting (CbC) safe harbour to include the OECD’s ‘anti-arbitrage’ rules. Model anti-arbitrage rules, to counter certain transaction-based potential tax avoidance mechanisms, were published by the OECD/G20 Inclusive Framework last December, and HM Treasury issued a statement in March 2024 announcing that that the UK would legislate for them in a future Finance Bill. Comments on the draft legislation are invited by 15 September 2024.

Further announcements were made including the abolition of the furnished holiday lettings tax regime from April 2025 and a call for evidence was launched with regards to the tax treatment of carried interest to close on 30 August.

In making these tax policy announcements ahead of the Budget, the new Chancellor demonstrates acknowledgment that businesses value certainty, as the latest Deloitte survey of UK Chief Financial Officers showed earlier this week, with a more predictable business environment seemingly having boosted the spirits of the corporate sector. Indeed, CFO perceptions of external uncertainty have fallen to the lowest level in more than eight years. Despite this degree of clarity, there is no doubt we will see a lot of speculation as to what further tax raising measures could be announced over the next 13 weeks, until the Autumn Budget.