Overview of the Autumn Budget 2024

On 30 October 2024, the Autumn Budget was presented to Parliament by the Chancellor of the Exchequer, Rachel Reeves.

It outlined the UK Government’s economic strategy and plans for taxation, spending and public policy in response to both short-term economic challenges and longer-term growth. The aims were to stabilise the economy, boost investment and address key priorities such as innovation and green energy. As the first budget of the new Labour government, it offers insights into the strategic direction of travel expected over the next five years.

The Autumn Budget introduced several measures that could impact on mergers and acquisitions (M&A) in the UK. It includes several positive incentives, particularly through tax reliefs and a commitment to fiscal stability. However, there are also challenges to navigate.

Below we have outlined the key measures introduced in the Autumn Budget that are likely to affect future M&A activity in the UK.

Key measures introduced in the Autumn Budget

Capital Gains Tax increases

A significant change is the immediate increase in the main Capital Gains Tax (CGT) rates, which increased to 18% for non and basic rate taxpayers, and 24% for higher and additional-rate taxpayers.

Additionally, Business Asset Disposal Relief (BADR) and Investors Relief (IR) will rise to 14% for the 2025/26 tax year and 18% from the 2026/27 tax year. The lifetime limit for IR will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024.

As a result of these changes, business owners planning to sell over the next year or so may want to consider accelerating their transactions to benefit from the current lower rates.

Employer National Insurance Contributions

The main rate of class 1 employer National Insurance Contributions (NICs) will be increased from 13.8% to 15.0% with effect from 6 April 2025, and the secondary threshold at which employer NICs are payable will be reduced from £9,100 to £5,000.

The changes will significantly increase costs for many businesses, eroding profit margins. As a result, buyers may lower their valuations to account for the added costs, and deals for companies with already low margins may become unattractive.

Inheritance Tax business and agricultural reliefs

From 6 April 2026, the current 100% rate of relief will continue for the first £1 million of combined agricultural and business property for individuals and trusts – except for shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM. However, the rate of relief will be 50% for such assets above the £1 million threshold and for all ‘not listed’ shares.

The changes will have a significant impact on family business succession plans, with early planning becoming even more essential.

Employee Ownership Trusts

The Autumn Budget has reinforced some of the appeal of selling to an Employee Ownership Trust (EOT) as an alternative succession planning strategy.

Selling a trading company to an EOT qualifies for a zero percent CGT charge, making it an attractive alternative to traditional M&A routes, particularly given the immediate rise in CGT rates. For companies that want to retain a strong employee-led culture, the EOT option offers significant benefits.

However, there has been some tightening of the rules, such as, the trustees of EOTs must be UK resident at the time of the sale, owners cannot retain control of the business or EOT post-sale, and EOT trustees are required to take reasonable steps to ensure that the purchase price paid to sellers does not exceed the market value of the Company.

For further information on EOTs, please refer to the following article – A guide to Employee Ownership Trusts | Gerald Edelman

Corporation Tax

The UK government has kept the Corporation Tax rate consistent at 25%. The predictability of this tax rate provides stability and certainty for investors. Typically, in an environment of tax unpredictability, M&A activity can be hindered. However, with the Government committing to a stable UK corporate tax rate, this is positive for deal-making.

Investment zones

New investment zones were announced as part of the UK Government’s strategy to boost growth in specific regions. These zones provide tax relief and incentives for businesses investing in these areas, including lower business rates and enhanced capital allowances.

As a result, M&A activity may increase in these regions, as businesses are likely to seek out companies with strong growth potential to take advantage of the tax benefits. This also supports growth and development at a local regional level.

Regulatory measures

The Autumn Budget includes efforts to simplify certain regulatory processes and reduce regulatory complexity, making it easier for companies, both domestic and foreign, considering UK acquisitions. This includes simplifying the overall registration and reporting requirements for Small and Medium Sized Enterprises (SMEs).

Conclusion

Some of the measures listed above may in the long-term create a more supportive and attractive environment for transactions, leading to an increase in UK M&A activity. However, the introduction of certain tax increases, will bring challenges to business owners.

For owners considering an exit or those looking to acquire, obtaining expert advice to guide you through the process and maximise potential returns is invaluable.