A Summary of Labour's 2024 Budget

Changes to Employer National Insurance Contributions and the National Living Wage announced in the budget have resulted in significant changes to the way healthcare businesses act as employers (find more on this on page 4). In addition, there were a range of other measures announced that could impact the healthcare sector:

Capital Gains Tax (CGT)

It was well-trailed before the budget that CGT would be increasing, and it is. Albeit not by as much as feared by some. The lower rate of CGT will rise to 18% from 10% and the higher rate to 24% from 20% from 30 October 2024. The rates on residential property will remain at 18% and 24% - presumably as analysis shows this will yield the maximum revenue for HM Revenue & Customs.

Business Asset Disposal Relief (BADR)

BADR provides a beneficial 10% rate of CGT for business owners for the first £1m of qualifying gains. This includes GP Partners when reducing sessions or retiring from a practice. Under the Budget, BADR survives initially, but the rate will increase to 14% from April 2025 and 18% from April 2026. One key planning point for partners considering reducing their sessions in their practice is whether it is beneficial to bring the date forward to lock in a lower rate of BADR. For example, if a partner was planning on reducing sessions on 30 April 2025, retiring a month earlier would provide BADR at 10% rather than 14%. Whilst there are other considerations, such as a reduction in their share of notional rent for a month, it is something that could be considered.

Inheritance Tax (IHT)

Another tax-raising measure was the significant change to the IHT regime. Unused private pensions will now be subject to IHT, generating a potential liability of 40%. Another indirect consequence could also be to reduce the amount of residential nil rate band for an individual. The Residential Nil Rate Band (RNRB) IHT tax-free allowance, of up to £175,000, relates to an individual’s residence in certain circumstances. If their estate exceeds £2m, the RNRB is reduced by £1 for every £2 that the value exceeds £2m. The inclusion of pension pots could make this erosion of the allowance more likely. Business Property Relief (BPR) enables relief of up to 100% on all qualifying business assets. The Budget introduced a limit of £1m for 100% relief, with the excess now dropping to 50%.

Income Tax (IT)

The budget confirmed that the current income tax rates and bands will remain in place until April 2028, at which point they will increase in line with inflation: Band Taxable income Tax rate Personal Allowance Up to £12,570 0% Basic rate £12,571 to £50,270 20% Higher rate £50,271 to £125,140 40% Additional rate over £125,140 45% In addition, adjusted net income in excess of £100,000 is subject to the personal allowance abatement. For every £2 net adjusted income exceeds £100,000, £1 of the personal allowance is lost. This creates an effective rate of tax of 60% for income between £100,000 and £125,140.

The Higher Income Child Benefit Charge (HICBC)

The HICBC is a tax charge designed to claw back child benefit where an individual or their partner has adjusted net income over a certain threshold. The threshold has been confirmed as remaining at £60,000 - £80,000, with 1% of child benefit being clawed back for every £200 that adjusted net income exceeds £60,000. The personal allowance abatement and the HICBC, in particular, create cliff edges in the tax system that must be planned for to mitigate hidden aggressive rates of tax. With good, regular management information and advice, individuals can plan for these cliff edges and ensure they are as tax-efficient as possible.

If you have any concerns or queries, please contact one of our healthcare experts.