2024 Autumn Budget: short-term pain, long-term gain?

Remember the 2024 Autumn Budget? It was only a month ago. The calendar says so, although it seems hard to believe. Anyway, while events have moved on, we’ve been thinking about some of the more positive components in Rachel Reeves’s first Budget.

Doom and gloom?

Bond markets weren’t too keen on the Budget. The 10-year gilt yield nudged gently upwards, as bond investors saw greater risk in lending to the UK.

Businesses didn’t like it. The Confederation of British Industry had warned the national insurance increase could affect business growth – but Reeves did it anyway.

The Institute of Fiscal Studies really didn’t like it. The think tank would be, “surprised if the spending plans after 2025-26 survive contact with reality.”

But is this just noise? What might the impact of the 2024 Autumn Budget be in the long-term?

Capital gains tax (CGT)

You’ll need to pay more on any gains. We all know that. If you’re a higher rate taxpayer your rate has risen from 20% to 24%.

You can offset use any previous, carried forward losses, and these may come in handy given the new, higher rate.

You can still offset gains through Enterprise Investment Schemes. These are of course at the riskier end of the spectrum and definitely not for everyone, as you’ll need to invest in smaller companies, where there’s a higher chance of loss. The Chancellor also extended these to 2035, so the schemes will be around for some years hence.

If you make a gift, perhaps consider doing it in specie. This is where you gift an asset, not cash, because it’s not subject to CGT.

Business asset disposal relief

This tax was 10% but is rising to 14% from next April.

There’s little way around this but a married couples could transfer shares to each other to make use of both sets of allowances at the reduced rate of tax. Doing it ahead of the proposed increase would also be helpful.

Income tax

You may well have seen income tax bands are frozen until April 2028. If(!) wages rise that means more people will be caught in higher bands. After that date, the bands will rise with inflation.

Pension and charitable contributions can help to minimise the impact, by extending your basic rate tax band, and lowering your tax liability.

Moreover, if you reduce your income overall, it might help you with things like child benefit.

Employers’ national insurance

Well, here’s the one generating so much ire.

Reeves has acknowledged this. But the lady’s not for turning.

Your business will no doubt be affected. But it’s likely that salary sacrifice arrangements – from pensions to childcare – can bring benefits to you and your employees in terms of NI savings and income tax.

Paying income before the higher rate takes effect wouldn’t hurt either. Also, if you have a Family investment Company or Personal Investment Company you can always think about your balance of salary and dividends.

We should also mention the minimum wage rise.

If you’re a low-income worker, you’ll probably be delighted. A business owner, perhaps less so. But considering how pension contributions might do to help wouldn’t hurt – and, dare we say it, there’s also a role to be paid by contractors instead of permanent staff, IR35 issues notwithstanding.

Sunny uplit plains?

Let’s remember the reason they’re doing all this is to fix public services and generate growth.

The criticism is about the means, not the end. Is it the right plan? There are plenty who disagree, such as the IFS, above. Gilt markets are mildly sceptical.

But this does fit a trend of democracies worldwide trying to boost GBDP rather than shrink debt. And it wasn’t imaginable a Labour Government would double down on Conservative austerity.

We’ll have to see what happens, but the 2024 Autumn Budget is definitely one to remember.

What we know for now is that there are plenty of attractive tax and financial planning opportunities. If growth kicks in, your money is also going to benefit over the long run … which is what it’s all about.

If you’d like to discuss your wealth, please get in touch on 020 7467 2700 and hello@firstwealth.co.uk.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.