After months of anticipation, the Autumn Budget 2024 has finally been unveiled, bringing clarity to weeks of speculation and rumours surrounding potential changes. With the budget deficit increasing from £20 billion to £40 billion, there was intense speculation about significant adjustments to personal taxation. Ultimately, the majority of the deficit will be addressed through changes to employer National Insurance contributions. While some changes to personal taxation were announced, they were less significant than many had predicted.
This budget serves as a reminder of the importance of making informed decisions based on concrete information rather than speculation. While we made some recommendations in anticipation of likely outcomes, we refrained from acting purely on speculation—a decision we are glad we took, as premature actions would have proven detrimental.
Key Changes Introduced
Capital Gains Tax Rates:
Basic Rate: Increased from 10% to 18%.
Higher Rate: Increased from 20% to 24%.
Pensions and Inheritance Tax:
Defined Contribution pensions will now be included as part of your estate for Inheritance Tax (IHT) purposes. This change will take effect from April 2027, following the conclusion of a consultation period in January 2025.
Business Relief Investments:
AIM Investments: These will no longer be entirely exempt from IHT but will instead be subject to a reduced IHT rate of 20%.
Business Relief Investments: Providers such as Time or Downing will now offer IHT-free allowances capped at £1,000,000. Investments exceeding this threshold will also be taxed at the lower IHT rate of 20%.
Business Asset Disposal Relief
For those selling a business, the £1 million exemption remains but the rate of capital gains above this threshold will increase from 10% to 14% in April 25 and increase to 18% from April 26.
Other changes introduced included the following
· A rise in Employers National Insurance from 13.8% to 15% and a reduction in the earnings threshold. However, there was an increase in the threshold for when employer NI starts to be paid.
· Income tax threshold will no longer be frozen from 2028.
· For those buying second homes the additional stamp duty levy has increased from 3% to 5%. Stamp duty rates were reduced in 2022 and there was no mention that these will be extended meaning that normal stamp duty rates are likely to increase again to previous levels from the 1st of April.
· Confirmation that state pensions will increase by 4.1% from April 2025.
· Introduction of VAT on private school fees
· Confirmation that there won’t be a British ISA
· From 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property.
While several significant adjustments have been announced, it is equally important to highlight the areas that remain unaffected despite much speculation before the budget.
The amount you can withdraw tax-free from your pension remains unchanged.
No changes to pension tax relief rules.
ISA allowances continue at their current levels.
Inheritance Tax thresholds remain the same.
Capital Gains exemption remains at £3,000
No changes made to gifting rules.
Overall, the changes introduced in the Budget 2024 were less significant than many had speculated. While adjustments to capital gains tax were anticipated, the increases were not as substantial as some of the rumours suggested.
The changes to pensions may influence future strategies. However, we will not make any immediate changes to our approach until the completion of the consultation process.
We hosted a webinar sharing our thoughts about the budget. Please find a link to the webinar here.