Autumn Budget 2024: Technology Sector Predictions & Wish List

The Prime Minister has already warned that the autumn budget held on 30 October 2024 will be ‘painful’ and that ‘big asks’ will be made of the public. Labour’s manifesto pledged not to increase income taxes, so we can expect other taxes to be in the firing line – for example inheritance tax and stamp duties may be impacted.

In particular however, it is expected that there will be a rise in Capital Gains Tax (CGT) rates, as it is widely believed that lower CGT rates benefit the wealthy.

A rise in CGT could be achieved in different ways, for example by removing the basic rate of CGT, increasing rates across the board, or removal of some CGT reliefs. Business Asset Disposal Relief is popular for entrepreneurs as this currently allows capital gains on disposal of business assets to be taxed at a low rate of 10%. The Government could remove the lifetime allowance for the relief of £1 million, or cut the relief altogether.

Increasing CGT could significantly impact the tech sector, particularly for entrepreneurs who have scaled up their company and are looking to exit in the short or medium term. For this reason the Federation of Small Businesses has warned the Government that going about raising CGT in the wrong way could seriously impact plans to grow the UK economy as it may lead to business owners looking to take or start up their businesses overseas.

It was announced in August by the Department for Science, Innovation and Technology that £1.3bn of investment for UK tech and AI projects has been shelved due to lack of available funding. Instead, the AI Opportunities Action Plan has been launched which is a plan to identify how the UK can best invest in computing infrastructure and AI.

This has led to accusations of the new Government having ‘low’ ambitions for the UK tech sector, and we strongly hope that there is better news to come in the autumn budget with regards to investing in the sector.

The Labour party pledged before the election that they would tackle the tax gap (the difference between tax that should be paid and tax that has been paid to HMRC) by investing in HMRC and specifically targeting tax avoiders. However, the 2022/23 tax gap figures that have recently been published overwhelmingly demonstrate that it’s small businesses that account for the majority of the tax gap at 60% (approximately £24 billion) of lost tax in 2022/23.

Approximately one third of all corporation tax due by small businesses was not paid to HMRC in 2022/23. HMRC have customer compliance schemes in place to support medium and large sized businesses and it may be argued that being under-resourced has led HMRC to steer focus away from smaller customers towards those with bigger liabilities, so it is possible this will now change in light of these statistics. If HMRC divert attention to smaller businesses, this will inevitably capture start-up and scale-up tech companies and it’s therefore important to remain compliant.

We hope that the autumn budget will flesh out the Government’s plans for abolishing the non-domicile regime, due to take effect from April 2025. There has been concern that increasing income taxes for foreign nationals by removing the non-dom regime may reduce investment in the UK and also may contribute to a skills shortage which could impact tech businesses looking to hire in the UK over time.

It has been reported that we might expect to see pension tax relief reform which we hope would not be so impactful as to deter individuals from working in the UK.

We may also see an increase in the National Minimum Wage which is good news for the lowest paid members of our society albeit a potential increase in staff costs for employers.