UK Autumn Budget 2024: Key Insights and Planning Tips for Your Finances

The Autumn Budget – What it means to you!

I have never known such anticipation and trepidation prior to a budget. With such a long gap between the election in July and the autumn statement in October, the uncertainty was palpable. As confidence is key to driving any economy, this painful wait caused knee-jerk reactions with business owners selling up, people drawing down on their pensions early, and second homes going on the market.

As a chartered and independent financial planning firm based in the heart of the Cotswolds, we know how crucial it is to understand the implications of the UK autumn budget 2024 for our clients, families and small businesses. With the 2024 Budget now released, let’s break down what it means for you in terms of personal finance, inheritance tax planning, and running a business. As ever, the devil is still in the details!

Capital Gains Tax (CGT):

The basic CGT rate has increased from 10% to 18%, while the higher rate has risen from 20% to 24%. However, the CGT rates on additional properties remain unchanged at 20% for the basic rate and 24% for the higher rate.

I am always reminding clients of the fact that CGT is the only tax that dies with you; the other taxes follow you to the grave! Capital gains tax can also fall due on a transfer of an asset to anyone other than your spouse, although there are some special instances where the gain can be rolled over and paid at a later date.

I did think that the CGT rates would be increased in line with income tax rates so we can take some small comfort that the change is not as bad as it could have been! In addition, if you have made a profit/ gain, then that is a good thing!

Inheritance Tax (IHT)

The IHT threshold freeze has been extended until 2030. Additionally, a new consultation on pensions brings in changes from 2027, making unspent pension pots potentially subject to IHT, which they are not currently.

Pensions are complicated, and the details of how this will be implemented will become clearer as the consultation progresses and concludes.

For now, the nil rate band and ‘residence nil rate band’ are still available for those who qualify. I did think that the residence nil rate band may be abolished, so again, I’m pleased with the status quo.

For estates valued below £2m, up to £1m IHT-free, can be passed to your beneficiaries tax-free.

Planning is crucial in this area as we gain clarity on changes to pensions and their impact on inheritance tax planning.

Stamp Duty Increase

This was not openly announced by the Chancellor on Budget Day but rather buried in the detail. If you’re considering purchasing a second property, be prepared for an increase in the Stamp Duty surcharge from 3% to 5%. In regions like the Cotswolds, where second homes are popular, this could impact buying decisions, particularly at higher price points.

Stamp duty on the purchase of primary residences will increase with effect from 1st April 2025 for both first-time buyers and people moving house generally.

My view is that it will slow an already lagging property market and, at the same time, make it more expensive for first-time buyers.

Business Asset Disposal Relief

It appears that this government wishes to load tax on success. Entrepreneurs’ relief in 2008 afforded up to £10m per individual of allowance at a reduced rate of 10% on qualifying business asset sales. Over the years this has been eroded to £1m, and now, with effect from 5th April 2025 up to £1m, sale proceeds will be taxed at 14% and in 2026 18%. This will most definitely discourage entrepreneurship, and in my role as UK President of the British Association of Women Entrepreneurs, I hear from members that this increase in tax will not encourage growth or investment in the UK.

Small businesses are the backbone of our society in the UK, and without them we will have no public sector! I really think that our politicians don’t get this, basic economics!

In addition to this, the National Insurance Contributions for employers have increased to 15% (some smaller businesses will gain additional relief with the employer’s allowance), which will be difficult to absorb for most businesses, especially those in retail, hospitality and personal care, who are really only just recovering from the pandemic. With many staff being seasonal too, the minimum wage increase (albeit welcome) will also have an impact on the bottom line and profits.

My view is that unemployment will rise as a result of this, and prices will increase as businesses have to pass the additional cost on to customers, which of course is inflationary.

Agricultural Property Relief APR

I think that this has been one of the most publicised tax changes. To hit our farmers with IHT such that they are unable to pass their land/farms down to the next generation without significant tax burdens, is abominable.

The relief now only applies to £1m of assets per person, with a 50% relief on the tax rate thereafter (20%). With the red tape and challenges already facing our farmers, this is just another nail in the coffin for homegrown food security.

It’s no wonder farmers and their supporters are protesting, so watch this space!

Personal Taxes

Personal tax brackets (thresholds) have been frozen until 2028. This, in itself, could mean that wages lose ground with inflation over time, and with prices potentially driven up due to the additional employer NIC contributions, this could really impact working people.

Private School Fees

Rachel Reeves confirmed the intended addition of VAT on private school fees, which will be implemented in January 2025. This has been much publicised and, in my view, an ill-thought-out policy. I personally know of parents who have scarified many things to send their children to private school and are paying the fees from already taxed income.

Additionally, there are kids with special needs who occasionally receive assistance from the private sector and from bursaries, all of which will put them at risk.

A group of schools have appointed Lord Pannick KC, one of the country’s top legal practitioners, to take the government to court over its decision to charge VAT on private school fees.

At Piercefield Oliver, we are working with families and considering how intergenerational wealth can help towards the extra costs.

Summary

I am struggling to see any positives in this budget. That said, there will be some creative planning to consider, and I encourage people to take expert advice as some of the areas mentioned above can be complicated to navigate.

If all else fails, I can have a pint of draft beer knowing that the tax duty has been reduced by 1p, although I’ll have to drink 599 at £6 per pint to get a free pint!