What does the autumn budget 2024 mean for law firms?

National insurance increases

The government confirmed the expected increase in employer national insurance (NI) contributions from 13.8% to 15%.

There was an additional surprise announcement that the threshold at which an employer pays NI will reduce from £9,100 to £5,000 per year until 2028.

After this, the threshold will increase in line with the Consumer Price Index. The increase applies to all employers’ contributions including Class 1A and Class 1B.

The employment allowance will increase from £5,000 to £10,500 annually, with the £100,000 eligibility threshold removed.

There were no changes to the treatment of employee benefits via salary sacrifice. Meaning that employers should think about reviewing employee benefits such as the pension scheme.

The use of salary sacrifice or exchange is one example of how both employees and employers can potentially benefit.

National minimum wage increases

The national minimum wage will increase across all age groups.

For those aged 21 and over, the rate will rise from £11.44 to £12.21 per hour, an increase of 6.7%.

For apprentices and those under 18, the raise will be from £6.40 to £7.55 per hour, an increase of 18%.

While most law firms may not have many employees earning national minimum wage, any increase can have an impact on the salary expectations of all employees, especially those at the lower end of the pay scale.

From April 2026, there will also be changes to the payrolling of benefits in kind and to the Employment Rights Bill, further increasing pressures on employers.

Business asset disposal relief and capital gains tax changes

Capital gains tax (CGT) is charged on the increase in value made by assets such as shares and second properties over their period of ownership.

Business assets are charged a reduced rate of CGT, known as business asset disposal relief, currently set at 10% on the first £1 million, and 20% thereafter.

However, this is set to change from April 2025, with the lower rate increasing to 14% initially, before going up to 18% a year later.

Residential rates for CGT remain unchanged at 18% and 24%.

These changes may lead to an influx of clients seeking to complete transactions before 5 April 2025.

Advice for businesses will be vital as disposals and the ownership of shares will need to be carefully planned to maximise the relief now available at these lower rates, and ensure all shareholders meet the conditions.

One area to be mindful of is clients with large portfolios of shares, or stocks and shares.

With the annual CGT exemption being low, many clients will now have an annual CGT bill and need to complete a self-assessment tax return, something that could be overlooked when considering a larger transaction.

Inheritance tax changes and their impact

There are a number of changes to inheritance tax (IHT) from 6 April 2026, for which careful planning will be needed:

• the amount of agricultural profit relief (APR) and business profit relief (BPR) available at 100% will be restricted to £1 million
• the rate of APR and BPR on amounts above this threshold will be restricted to 50%, meaning an IHT charge of 20%
• shares listed on the alternative investment market (AIM) will not benefit from the 100% relief on the first £1 million and so any shares held will be taxed at an IHT rate of 20%
• the freeze on IHT nil rate bands has been extended for a further two years until 6 April 2030

It was also announced that from 6 April 2027, unused pension funds and death benefits payable from a pension will be included in a person’s estate for IHT purposes.

This will see significant sums being added to an individual’s estate, potentially impacting the property nil rate band if an estate is valued at more than £2 million.

Family-owned businesses will need to consider how these measures may impact on their estate and future succession plans.

In the past, for businesses that benefited from full relief from IHT, the older generation would remain in the business until they died – passing the business on to the next generation, free of IHT.

However, they would now be advised to consider how they will deal with succession to ensure they obtain the best relief and minimise the tax liability the next generation will have to pay to continue the business.

In many cases, these clients are asset rich but cash and time poor, meaning that they would struggle to raise the funds to pay an IHT liability without having to break up and sell parts of the family business or farm.

One consideration is likely to be insuring against the IHT liability. The use of life insurance can guarantee a lump sum (paid into trust) to cater for some or all of the potential tax liability on death.

The long-term impact of these changes is hard to predict, but for family-owned businesses this could significantly change the way they operate their businesses and secure their future.

We would expect to see families now planning longer-term exit strategies in anticipation of the rule changes from April 2026.

These changes will not only affect farming families and family-owned businesses but also change the reporting of IHT to HMRC.

Often, the private client solicitor acts as the personal representative (PR) for the estate.

After 6 April 2026, the PR will need to work with the pension scheme administrator (PSA) to establish the new estate value.

Both parties will then need to complete separate returns to HMRC, while often the assets will be intrinsically linked (such as business premises within the pension scheme).

This will bring new time, cost and knowledge challenges to estate administration and it will be important to forge good working relationships with financial planners.

Stamp duty land tax

There will be a rise in stamp duty land tax (SDLT) on purchases of additional properties from 3% to 5%, with immediate effect.

There will also be a change in the SDLT bands from 31 March 2025 when the residential nil rate band will revert to £125,000.

First time buyers will also be impacted when they face a reduction in the nil rate from £500,000 to £300,000.

Budget impact overview

Legal firm leaders should be considering their own long- and short-term plans while looking after their clients, as these changes will have a substantial tax impact on both clients and legal business owners.

With the exception of the immediate rise in CGT rates, there is time to plan for these changes.

With the government still in the process of releasing the fine print, we would recommend asking before you act.