Autumn Budget 2024
Image: Chris’ own “Budget briefcase” that was used in The Crown TV series!
Rachel Reeves’ first Budget as Chancellor has had the rumour mill in overdrive as she strives to fill a black hole in the public finances.
Several anticipated changes – like reintroducing the Lifetime Allowance and capping tax-free cash on pensions – did not come to fruition, which is a positive outcome for clients. However, a range of tax-raising measures has been introduced that you should be informed about.
Read our summary of the key points below:
Inheritance Tax (IHT) changes
Inherited pensions
From 6 April 2027, when a pension scheme member dies with unused funds or without having accessed all of their pension entitlements, those unused funds and death benefits will be treated as being part of that person’s estate and may be liable to IHT.
The change will apply to both Defined Contribution (DC) and Defined Benefit (DB) schemes.
Where the pension benefits are left to a spouse/civil partner, the spousal exemption will still apply.
The Government has opened a consultation on the processes required to implement the changes. Responses must be in by 22 January 2025.
Many people use their pensions as intergenerational wealth transfer vehicles. So, plans for passing on wealth may need to be reassessed.
However, there will no doubt be much detail needed from the consultation, with the potential for changes to be made. So, a watching brief as opposed to immediate action may be prudent.
Freezing of IHT thresholds
The IHT thresholds were already fixed at their current levels until April 2028. This time period has been extended to April 2030. This measure will fix the:
- Nil-rate band (NRB) at £325,000
- Residence nil-rate band (RNRB) at £175,000
- Residence nil-rate band taper, starting at £2 million
Agricultural Property Relief (APR) and Business Property Relief (BPR)
From April 2026, qualifying AIM Shares will only benefit from 50% relief as opposed to 100% relief currently. This means AIM shares will be taxed at an effective 20% IHT rate from 6th April 2026.
Other business and agricultural assets will still benefit from 100% relief for the first £1 million and thereafter will receive 50% relief, again an effective rate of 20%.
Capital Gains Tax (CGT) changes
CGT rates
The main rates of CGT are currently charged at a lower rate of 10% and a higher rate of 20%, and these will be increased to 18% and 24% respectively from 30 October 2024. These new rates will match the residential property rates, which are not changing.
Business Asset Disposal Relief and Investors’ Relief
There are two reliefs which offer access to a lower rate of CGT: Business Asset Disposal Relief (BADR), and Investors’ Relief (IR). The rate for both BADR and IR will increase gradually, to give business owners time to adjust to the changes. The BADR and IR rates will rise to 14% from 6 April 2025, and will match the main lower rate of 18% from 6 April 2026.
The lifetime limit for IR will also be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for BADR.
Employers’ National Insurance (NI)
Employer NI is to increase to 15% (from 13.8%) from April 2025, and the secondary threshold will reduce to £5,000 (from the current £9,100), i.e. employer NI will become payable on an employee’s earnings above £5,000pa.
The Employment Allowance, a National Insurance exemption for smaller businesses, will increase to £10,500 (from £5,000).
Income Tax (IT) and Personal National Insurance (NI)
The government will not extend the freeze to IT and NI contributions thresholds. From April 2028, these personal tax thresholds will be uprated in line with inflation.
Stamp Duty Land Tax (SDLT)
The higher rates of SDLT for purchases of additional dwellings (second properties) and for purchases by companies is increasing from 3% to 5% above the standard residential rates of SDLT.
This measure also increases the single rate of SDLT payable by companies and other non-natural persons purchasing dwellings over £500,000, from 15% to 17%.
Both changes apply to transactions with an effective date on or after 31 October 2024.
National Minimum Wage
The National Living Wage will increase from £11.44 to £12.21 an hour from April 2025. The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour.
State Benefit and State Pension increases
From April 2025, a 4.1% increase to the basic and new State Pension meaning the full new State Pension will rise from £221.20 to £230.25 a week, while the full basic State Pension will increase from £169.50 to £176.45 per week.
The Pension Credit Standard Minimum Guarantee will increase by 4.1% from April 2025, meaning an annual increase of £465 in 2025/26 in the single pensioner guarantee and £710 in the couple guarantee.
Working-age state benefits and the Additional State Pension will rise by 1.7% in April 2025, in line with inflation.
VAT on private school fees
From January 2025, 20% VAT will apply to private school fees across the UK, and the business rates charitable rates relief for private schools in England will be removed.
ISAs
There are no changes to the current subscription limits. These are £20,000 for ISAs, £4,000 for Lifetime ISAs (included in the £20,000 ISA subscription limit) and £9,000 for Junior ISAs and the Child Trust Fund. These will be fixed until 5 April 2030.
The ‘British ISA’ proposed at the last budget will not go ahead.
Pre-budget rumours of a cap on accumulated ISA savings did not materialise either.
Corporation Tax
The government has published a Corporate Tax Roadmap.
The Roadmap includes a commitment to:
- Cap the Corporation Tax Rate at 25% for the duration of the Parliament
- Maintain the Small Profits Rate and marginal relief at current rates and thresholds
- Maintain key features as such as Full Expensing, the Annual Investment Allowance, R&D relief rates, and the Patent Box
Savings allowances and Dividend Nil Rate
The starting rate for savings will remain at £5,000 for the 2025/26 tax year, maintaining its current level.
The Personal Savings Allowance will be £1,000 for those with adjusted net income of £50,270 and below, £500 for those with adjusted net income between £50,270 and £125,140 and will be £0 for those with adjusted net income above £125,140, maintaining the current levels.
The Dividend nil rate of taxation will remain at £500.
Non-Domicile changes
The non-domicile tax regime is to be abolished from 6 April 2025. Domicile will no longer be a feature of the UK tax system and will be replaced by a system based on residency.
The government will:
- Introduce a new 4-year foreign income and gains regime for new arrivals who have not been UK tax resident in the previous 10 years
- Allow individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility
- Reform Overseas Workday Relief
- Replace the domicile-based system for inheritance tax with a residence-based system
If you would like to discuss any of the changes above, please call the Team on 01283 387070.
Return to News