Autumn Budget 2024 and its impact on technology, media and telecoms

How was the Technology, media and telecoms sector impacted by the 2024 Autumn Budget?

See our full Autumn Budget summary download (pdf)

The Autumn Budget has far-reaching implications for UK businesses generally, affecting them directly through higher employment costs (on top of proposed greater employment laws), changes to CGT and IHT reliefs and rates, and indirectly through the impact on business confidence, and growth forecasts.

And with the Chancellor rowing back on her recent CBI pledge not to raise taxes further, it is not outside the realms of possibility that we could see further tax rises in 2025 on top of those already announced.

There are also wider issues to contemplate, such as availability of funding, the impact on the sector of increased energy prices, the government's net zero programme, the likely slower than expected fall in interest rates, the ongoing impact of AI, and possible US tariffs under a Trump administration.

But what specifically was mentioned in the Autumn Budget that could affect the TMT sector?

R&D and innovation

Research & Development (R&D) tax relief is a key tax incentive for innovation, and it has seen a lot of change recently, particularly since 1 April 2024 with the introduction of a single merged R&D Expenditure Credit (RDEC) scheme and restrictions on claiming for expenditure incurred on overseas R&D.

We have also seen increased HMRC scrutiny of claims and further procedures put in place to make the claims process more rigorous.

There were pre-Budget rumours that R&D funding might be reduced, but that did not happen.

Whilst the Autumn Budget did not announce any major changes to R&D, there was further clarification of HMRC's monitoring approach of claims. HMRC's increased scrutiny makes it essential to use R&D tax experts to manage claims across the line.

Check out our recent article from our R&D tax team on how R&D relief fits into a global perspective.

Investors

Before the Autumn Budget, back in September 2024, we learnt that the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trusts were set to remain in place until at least April 2035, providing assurance to investors and the market that these schemes were here to stay for the medium term. There had been concern that they might not survive a new government.

These schemes provide tax relief to UK investors in innovative companies and are often a key part of structuring any funding.

However, the Autumn Budget did announce changes to carried interest. Currently, such carried interest, generated over many years on private equity investments, is subject to CGT at 28%. Other countries have lower-taxed carried interest provisions.

The Autumn Budget announced that from April 2026, all carried interest, which is mainly held by individuals engaged in private equity, will be taxed within the income tax framework and subject to class 4 NICs.

As an interim step, the current two CGT rates for carried interest will both increase to 32% from 6 April 2025, and there will be a consultation on introducing further conditions for access to the regime.

These changes could reduce the UK source of investment funding into the TMT sector as investors seek to relocate overseas, thus meaning UK-based TMT businesses may need to look elsewhere for investment.

This is a situation we will be monitoring with interest.

Net zero and sustainability

The government has made clear its net zero commitments.

This creates new opportunities for tech and innovation, both in terms of the market and being attractive to investors.

The key policy is that the UK must meet net zero by 2050. In addition, the UK has also committed to a 68% reduction in emissions by 2030.

The Labour government has announced several new bills that are relevant to net zero, including:

Great British Energy Bill
Crown Estate Bill (to allow for easier investment in public infrastructure)
Sustainable Aviation Fuel (Revenue Support Mechanism) Bill.

The government has also said it will pursue other policies that affect climate change mitigation and adaptation, including policies on home insulation, nature and biodiversity, land management, and the water sector.

Capital allowances

The 100% first-year allowances for qualifying expenditure on zero-emission cars and for qualifying expenditure on plant or machinery for electric vehicle charge points will be extended to 31 March 2026 for corporation tax and 5 April 2026 for income tax.

On the subject of electric vehicles (EVs), we have seen the UK struggle towards a transition to these vehicles, with a decline in EV manufacturing output. This is a fluid situation, and we can expect to see more government announcements on this issue as talks with the market continue.

Employers' NICs

A big shock for businesses is the April 2025 increase in employers' NICs from 13.8% to 15.0%, compounded by the reduction in the employee threshold at which it becomes payable from £9,100 to just £5,000. So more employers' NICs will be payable at a lower threshold.

The Treasury estimates this could generate £25.7bn annually, although the Office for Budget Responsibility is less optimistic (around £16bn), as the policy is likely to lead to job losses, less investment and wage reductions.

There is some relief in that the Employment Allowance, which provides relief for employers from employers' National Insurance, is being doubled from £5,000 to £10,500. However, this allowance is subject to conditions, and is not available where the sole employee is a director.

A further respite comes from the removal of the employers' NICs cap of £100,000 so that larger employers can benefit too from the employment allowance.

The NIC change is likely to make other forms of remuneration (e.g. tax-advantaged share plans) and salary sacrifice more attractive in future, and we can expect to see companies looking to incentivise employees in ways that do not attract NICs, such as via pension contributions.

National Living Wage

As we discuss in our more detailed article, the National Living Wage (NLW) is rising in April 2025 from £11.44 to £12.21 per hour. In addition, the hourly rate for those aged 18–20 will rise from £8.60 to £10.00.

With the employers' NICs increase on top of the change to the NLW, this will increase the cost of an employee on NLW (working 35 hours per week) to just under £2,270 per employee from April 2025.

As salary sacrifice schemes may become more popular in future due to the NIC rise, it will be important to keep in mind that the NLW increase could put such schemes at risk if they reduce salaries to below the NLW rates.

Company directors

There were no changes in dividends tax, despite pre-Budget fears that dividends would become liable to NICs.

But one less-publicised April 2025 change announced in the Budget is the increase in the late payment interest rate charged by HMRC on unpaid tax liabilities, with further in-year changes in the rate to be reviewed on a quarterly basis. This will affect directors with large overdrawn directors' loan accounts.

Capital Gains Tax

With effect from 30 October 2024, the lower rate of CGT increased from 10% to 18% and higher rate from 20% to 24%.

In addition, the £1m Business Asset Disposal Relief (BADR) lifetime allowance is retained, but with an increasing rate from 10% to 14% from April 2025, and then to 18% from April 2026.

A rise in the rate was expected, but it could have been much higher had the pre-Budget speculation of aligning CGT rates with those of income tax happened.

There are clearly some planning points here around the BADR CGT rate rising and possible exiting from a business before then, subject to commercial and family considerations. But beware of attempting to crystallise a gain that might be caught by anti-forestalling rules in the legislation.

Any distribution by a liquidator in a Members' Voluntary Liquidation would need to be made before 6 April 2025 to obtain the 10% BADR CGT rate, so the disposal must fall into this current tax year.

Tech companies need an environment that remains attractive for investing in new ventures towards future economic growth and innovation, so these changes in CGT are unwelcome, even if they are not as bad as was feared ahead of the Budget.

See our post-Budget article: Autumn Budget 2024 and its impact on solvent liquidations.

Corporation Tax

As expected, there was no change in the rate of corporation tax, and the Budget confirmed that the Annual Investment Allowance will remain at £1m. This provides certainty for companies budgeting for tax and investment spending.

A welcome Budget publication was that of a corporate tax roadmap.

The roadmap confirms that the corporation tax rate will remain at 25%, and the existing small profits rate and marginal relief thresholds will be retained. It also confirmed that full expensing relief will be kept, as well as R&D relief and the patent box.

Inheritance Tax

From April 2026, Business Property Relief will be capped at £1m. Above that, the rate of relief will be 50%.

IHT relief at only 50% over the £1m cap will potentially create a significant cash flow challenge for family businesses, having to distribute profits out from the business in the form of taxable dividends to be able to fund the IHT payable.

Business owners will need to review their succession plans to provide the necessary resilience to ensure their business can cope with an increased IHT liability from April 2026.

There are a number of practical solutions available to mitigate IHT, and we can discuss these with you.