Budget 2024

Now the dust is settling on the Budget and the frenzied pre-Budget deal making is behind us, some quick reactions, predictions and thoughts from me below.

• Inevitably the main observation is the CGT rate going up to 24% from 20%. In the run up to the Budget there was loads of speculation that CGT rates could go as high as income tax rates. Compared to equivalent levels in Europe, 24% is still quite low. Indeed compared to California, where capital tax rates are a whopping 38%, it is super low. It always intrigues me that one of the arguments against higher rates of CGT is that they have the potential to stifle entrepreneurialism and innovation. Try telling that to those West Coast tech companies. 
• Taxation of carried interest goes up in April 2025 from 28% to 32% and is an increase that private equity can live with (which you would expect after so much lobbying). But the reprieve is likely to be temporary. Tucked away is an announcement that from April 2026, carried interest will be taxed as income (potentially with an effective marginal rate of circa 34%) thereby replacing the long-standing approach that super profits are normally taxed as capital. Will this 'compromise' work? Probably yes, provided the reforms are sensibly crafted. 
• Sales to Employee Ownership Trusts will increase. Relatively speaking, uncapped zero CGT always looked good and more so now. Call me cynical, but I smile wryly when business owners previously laser focused on making lots of money, start discovering "employee engagement" with the zeal of a convert. If EOTs allow you to keep more of what you get, it is obvious there will be more EOTs.
• Despite apparent Treasury misgivings over Business Asset Disposal Relief (or what they call BAD Relief), it has survived, although the current rate of 10% will tick up to 18% by 2026. This means EMI and CSOP options continue to be hugely attractive as an employee equity play and conceivably even more so when you factor in the inevitable economic incidence of employer NICs rising to 15% from April 2025. If the wage bill is going up, some businesses will look at other ways to 'pay' people.
• Speaking of higher employer NICs, transferring that liability to employees who have been granted taxable share options (or HMRC approved options that have gone sour) is very typical for most private companies. Higher employer NICs means even more incentive (ho ho) for companies to transfer that liability.

Finally, what is disappointing is that I don't see the Budget as being especially pro-growth or pro-business. 

I really hope, similar to the last time that Labour was in power and introduced EMI and SIPs, that this government can be equally bold in helping everyone to share in the fruits of their labour. 

Hey Rachel, ever heard of tax approved profit-sharing plans?   

Share your profits with all your associates, and treat them as partners. In turn, they will treat you as a partner, and together you will all perform beyond your wildest expectations.