Autumn Budget: October 2024

Labour’s Rachel Reeves presented her first Budget as Chancellor on 30^th October 2024. There were many rumours in the press beforehand, however, many of these did not come to pass.

The first thing to point out is that many allowances remain as they are, although some are now frozen for longer, as detailed below.

Here is a summary of the key points – there’s a lot to cover…..!

Capital Gains Tax (CGT)

Over the past couple of years, the CGT allowance has been vastly reduced and now sits at £3,000 per annum, per individual.

The tax rates for capital gains above this allowance, will increase immediately (i.e. from 30^th October 2024):

• From 10% to 18% for basic rate taxpayers
• From 20% to 24% for higher rate and additional rate taxpayers

There is no change to CGT rates on residential property, which will continue to be taxed at 18% and 24%.

Business Asset Disposal Relief (BADR)

This relief provides a special rate of CGT of 10% on disposals of business assets up to a lifetime allowance of £1 million.   From 6 April 2025, the rate of CGT will increase to 14% and from 6^th April 2026 to 18%, on disposals up to £1 million.  Anything above this £1,000,000 is taxed at 18% or 24%

Pensions and Inheritance Tax (IHT)

This is where we saw the biggest change – from 6^th April 2027, most pension death benefits will be included in an estate for IHT purposes . The government have opened a technical consultation on how to implement this change and how the payment of the IHT will interact with the deceased member’s Estate.   Therefore, we do not yet have the full details.  We expect there will be a big response to this change from the pensions industry, during the consultation period.

As of now, the tax position and IHT efficiency of pensions remains the same – until 2027, therefore, as things stand, there are no immediate changes.  However, as more information emerges, we will keep this area under review, and address how this affects your individual circumstances, as part of your annual Financial Planning review.

Inheritance Tax (IHT)

The current thresholds of £325,000 (Nil Rate Band) and £175,000 (Residence Nil Rate Band) were frozen until 6^th April 2028 – this has now been extended a further two years, to 6^th April 2030.

There were also changes announced around Agricultural Property Relief and Business Property Relief:

From 6^th April 2026, only the first £1 million will get 100% relief on the combined value of agricultural and business property. For qualifying assets over £1 million, relief will be given at 50%, resulting in an effective rate of 20%.

Shares quoted on certain recognised stock exchanges, such as AIM, have been eligible for 100% relief once they have been owned for 2 years, provided the company is a qualifying business.  From 6^th April 2026 this relief will be restricted to 50% for any such shares, regardless of value, resulting in an effective rate of 20%.

National Insurance Contributions (NIC) – Employers

From 6^th April 2026, the rate that employers pay NICs will increase from 13.8% to 15% – an increase of 1.2% – and the threshold at which point employer’s start paying NICs on an employee’s earnings, will reduce from £9,100 per annum to £5,000 per annum.  This threshold will be frozen until 6th April 2028 and will increase by CPI thereafter.

The Employment Allowance allows employers with NIC bills of up to £100,000 in the previous tax year, to deduct £5,000 from their NIC bill. From 6^th April 2025, this allowance is being increased to £10,500 and the £100,000 threshold will be removed, so that all employers will be eligible for the allowance.

State Pensions

It was confirmed that the triple lock on State Pensions would be maintained for the remainder of this parliament, guaranteeing a 4.1% earnings-based increase in April.

This means that the full New State Pension will increase to £230.25 a week from 6^th April 2025. We expect the full Basic State Pension to increase to £176.45 a week (single person) or £282.15 a week (married couples and civil partners).

The 4.1% increase will also apply to the guaranteed element of Pension Credit.

Others

A couple of other points to note:

• Income tax thresholds will remain frozen until 6^th April 2028, after which they will again increase in line with inflation.
• ISA limits remain as they are until 5^th April 2030: £20,000 for adults, £4,000 for Lifetime ISAs and £9,000 for juniors.
• The concept of domicile status will be removed for tax purposes, replacing it with a new residence-based regime, from 6^th April 2025.
• A loophole that was created around the lifetime allowance, where UK pensions were transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS), will be closed.
• VAT on private school fees at a rate of 20%, will be introduced from 1^st January 2025.
• The government will not proceed with the reform to base the High Income Child Benefit Charge (HICBC) on household incomes.
• A Corporate Tax Roadmap was published, which includes a commitment to cap the Corporation Tax Rate at 25% for the duration of parliament, as well as maintaining the Small Profits Rate and marginal relief at current rates and thresholds.

As always, we are here to guide you through how these changes may affect you and your wider Financial Planning, please contact Val or Claire, to discuss further.