A big Autumn Budget

On the 30th October 2024, Chancellor Rachel Reeves delivered the most anticipated autumn budget in years. Shrouded in rumour, leaks and – let’s face it – fear, it could have a profound impact on the nation, its people and your financial future. A lot’s been written about what might happen. Here’s a brief precis.

 

All change

I don’t know about you, but this Budget feels like a big step change. We have a Chancellor keen to make her mark – and move on from a stuttering start.

Compared to history, and considering the budget content, it’s probably not going to trigger the sort of constitutional crisis from 1909, the walk outs from the chamber in 1981, or the 2022 ‘Britain-breaking’ statement.

 

The story so far

We know Labour has committed to changing the non-dom tax rules, making private schools pay VAT and business rates, and dialling up stamp duty when non-UK residents buy residential property.

We know they’re not looking at taxes on ‘working people’ nor pushing corporation tax above 25% for the remainder of their parliament.

At least that’s what they said. Beyond that, we start to move into reasonable speculation.

Changes to inheritance tax (or IHT), capital gains tax (CGT), pensions tax relief and business assets disposal relief have all been referenced.

Let’s look at these in turn.

 

IHT

The Chancellor tinkered with IHT – but a lot of people were talking about an overhaul.

Many expected this to include the nil rate band jumping from £325,000 to £500,000, but it remains as the prior. The residence nil rate also remains at 175,000.

There were also some changes made to business relief which can be seen here.

We didn’t know the extent to which the government wanted to hammer people who pass on family businesses. But it seems they’ve softened the blow with other measures.

 

Capital Gains Tax

One option the government had is to align CGT rates with income tax rates. Estimates varied over the impact on the fiscal black hole. But it’s an easy option for a Chancellor who needs to fill it.

In actuality, main rates of Capital Gains Tax (CGT) are increasing from 10% and 20% to 18% and 24% respectively. This will take effect for disposals made on or after 30 October 2024.   In addition to this, the rate of CGT for Business Asset Disposal Relief and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026.

But, no changes will be made to the 18% and 24% rates of Capital Gains Tax that apply to residential property gains.

We prepared for all eventualities including immediate changes.

 

Pensions

Before the budget, the general hypothesis was that immediate changes to pensions tax relief were perhaps less likely.

That said, everything was in scope. There was industry talk of:

  • Reintroducing the lifetime allowance on total pension saving
  • Limiting the tax-free cash you can take from your pension pots at 55
  • Charging employers national insurance on certain pension contributions

A big part of the budget yesterday was the latter bullet there – employer national insurance contributions. All decisions made by the Chancellor regarding pensions can be seen here.

Business Assets Disposal Relief

Business Assets Disposal Relief provides some taxpayers with a 10% CGT rate when they sell certain business assets. It has a lifetime limit.

It’s a niche, non-political target. But, the government needs to encourage small businesses. And, if they want economic growth, this is a major source of it. Hence, we expected some changes.

In the budget, Chancellor of the Exchequer Rachel Reeves announced that Business Assets Disposal Relief has been retained for the period to 5 April 2025. It will then increase to 14% from 6 April of the same year, and then increase further to 18% from 6 April 2026.

Elsewhere

Before the budget, no-one was talking about changes to ISAs or other tax-free savings incentives.

But they were talking about wealth taxes. When we say ‘they’, we mean unions, the media and other third-party sources. No government source confirmed they were looking at a wealth tax. But we all know governments float ideas through third parties to take a temperature check.

They were certainly right on the ISA front. No changes are being made as per the budget.

 

And that’s about it for budget highlights.

We hope this precis gets you thinking. We’ll publish our further reaction to the Budget as soon as we can and be in touch with advice and bespoke measures.

As always, please let us know if we can help. We’re at hello@firstwealth.co.uk or 020 7467 2700.

 

Approved by Best Practice IFA Group Limited on 30/10/2024.


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