Autumn Budget 2024

The Chancellor of the Exchequer, Rachel Reeves, delivered the first Budget of the new Labour government on Wednesday 30th October. Below we provide a summary of the immediate announcements from the Budget and what they mean for your finances.

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Pensions

From April 2027 an individual’s pension are proposed to be treated as part of their estate for IHT purposes (currently, there is usually no IHT charged, although in some cases tax charges will apply to lump sums or income drawn by the beneficiary). This may have a considerable impact on the tax and investment planning arrangements of individuals. Those who have adopted a ‘live off everything but spend the pension last’ might revisit this approach and the level of any future contributions, particularly if this was IHT driven.

Capital Gains Tax

From 30 October 2024, the main CGT rate for all assets is now 24% (other than receipts of carried interest, which remains at 28%). This 24% rate previously only applied to residential property that was not exempted under principal private residence (PPR) relief. Where the gain can be matched against the taxpayer’s basic rate band, the rate is now 18% for all assets. Previously it was 10%, except for residential property and receipts of carried interest.

From the same date, the CGT rate payable by trustees and personal representatives increases from 20% to 24% (other than receipts of carried interest, where it remains 28%). From the 2025/26 tax year the rate of CGT on carried interest will increase to a flat rate of 32% for individuals, estates and trusts. From 2026/27, carried interest will be brought within income tax, subject to a multiplier of 72.5% in some cases. The CGT annual exempt amount remains £3,000 for individuals and estates and £1,500 for most trusts.

Inheritance Tax

The IHT nil rate band has been fixed at £325,000 since 6 April 2009. The Chancellor extended the freeze on this figure for two further years until the end of 2029/30. Holding the threshold at the same amount for 21 years from 2009 to 2030 will bring far more people into the scope of the tax. However, the £175,000 ‘residential nil rate band enhancement’ on death transfers can reduce the impact where it applies. A married couple may be able to leave up to £1 million free of IHT to their direct descendants (£325,000 plus £175,000 from each parent), but the rules are complicated, and the prospect of the nil rate band being fixed for another 5 years increases the importance of proper IHT planning.

It was widely predicted that the Chancellor would reform some of the generous reliefs that can be used to protect the value of an estate from IHT. She announced two significant changes to apply from 6 April 2026.

Agricultural Property Relief and Business Property Relief can, at present, provide a 100% deduction from the value of qualifying assets. From 6 April 2026, this will only apply to the first £1 million of total value of agricultural and business property in an estate. Above that value, the relief will be restricted to 50%.

Shares quoted on certain markets of recognised stock exchanges, such as AIM, have been eligible for 100% relief once they have been owned for two years (provided the company is a qualifying trading business). This relief will be restricted to 50% for any such shares, regardless of total value, from 6 April 2026.

Individual Savings Accounts (ISAs)

The investment limits for ISA have not changed since 2017/18: they are £20,000 for a standard adult ISA (within which £4,000 may be in a Lifetime ISA), and £9,000 for a Junior ISA or Child Trust Fund. These will now remain fixed until 5 April 2030.

Review your financial plan

We recommend that you review your financial plans regularly as some aspects of the Budget will not be implemented until later dates.

We will, of course, be happy to discuss with you any of the points covered and help you adapt and reassess your plans in the light of any legislative changes. We encourage you to visit Carpenter Box’s Budget Hub for more information on the key tax changes announced in the Chancellor’s speech.

For further advice on any of the topics raised, please get in touch on 01903 534587.

This information is correct as of 30th October 2024.