As you will be aware, the long-awaited first budget of the new Labour government was delivered by the Chancellor, Rachel Reeves, on Wednesday 30th October 2024, in place of the usual Autumn Statement.
We here at Westerby have kept a very close eye on the Chancellor’s statement, as well as the initial market and industry reactions, and we are pleased to present our key takeaways that may impact our clients going forward.
Unchanged
Firstly, we, as many, were surprised by just how many things were not changed. Despite rampant speculation in the media, the following elements of the tax regime have remained the same:
- Income Tax rates
- Income Tax bands will remain static until 2028 and then increase in line with inflation
- Employee National Insurance (NI) rates
- VAT rates
- The Pension Annual Allowance of up to £60,000
- The abolition of the Pension Lifetime Allowance was maintained
- Pension Tax-Free Cash entitlement of 25% up to the value of £268,275
- The ISA Annual Allowance of £20,000
- Capital Gains Tax Annual Allowance of £3,000
- Inheritance Tax Nil Rate Band and Main Residence allowance of up to £325,000 & £175,000 respectively per individual albeit now frozen until 2030.
However, the following elements of the tax regime will be changing:
Inherited Pensions
One of the most significant announcements was that, with effect from 6th April 2027, most unused pension funds and death benefits will be included in the value of a person’s estate for Inheritance Tax (IHT) purposes.
Currently, when an individual passes away their pension does not form part of their estate when calculating any IHT liability. Going forwards, whilst an individual will likely still be able to pass their pension assets to their spouse tax-free, under the spousal exemption rules, on the second death the accumulated total of both spouses’ pensions will form part of the estate.
However, it must be stressed that the full details of this are as yet unclear and a consultation is expected to be published next year. We will of course update you further when this is received.
Non-domicile Tax Status
With effect from 6th April 2025, the non-domicile tax regime will be fully abolished. The UK tax system will be reformed to be based solely on residency, with the concept of domicile no longer playing a role.
Capital Gains Tax Rates
Immediate changes were made to the Capital Gains Tax regime for disposals of assets made on or after the 30th October 2024.
The main rates of Capital Gains Tax on assets other than residential property and carried interest, increased from 10% for gains within the basic rate of income tax and 20% for gains above that, to 18% and 24% respectively.
Changes were made to the rate that applies to Trustees and Personal Representatives, which increased from 20% to 24%. This brings all rates in line with those of rental and investment properties.
Further reforms to Capital Gains Tax for Business Asset Disposal Relief and Investors Relief will be introduced from 6th April 2025 with further changes announced from 2026 onward.
Employer National Insurance Contributions
With effect from 6th April 2025, it was confirmed that the rates on National Insurance (NI) for employers will increase from 13.8% to 15%. In addition to this, the secondary threshold, which is the amount over which an employer will pay the standard rate of NI on earnings, has been reduced from £9,100 to £5,000. This effectively means that employer NI will be payable on an employee’s earnings above £5,000 per annum.
In addition, it was confirmed that The Employment Allowance, an NI exemption for smaller businesses, will increase from £5,000 to £10,500.
Agricultural Relief (AR) and Business Relief (BR)
With effect from 6th April 2026, the 100% rate of relief will continue for the first £1 Million of combined agricultural and business property. However, the rate of relief will be 50% thereafter and it will also immediately reduce to 50% for any shareholdings not listed on recognised stock exchanges, such as the Alternative Investment Market (AIM).
However, it must be stressed that the full details of this are not as yet clear, and a consultation is expected to be published next year. We will of course update you as further information is received.
Stamp Duty Land Tax (SDLT)
With effect from 31st October 2024, the higher rates of SDLT for purchases of additional dwellings, such as second properties, is increasing from 3% to 5% above the standardised residential rates.
Next Steps
As you can see, a number of changes that may affect your financial planning are being introduced. Should you wish to speak to your adviser and talk through any of these in greater detail, please contact us to arrange a meeting.
📣 Attention to all financially savvy individuals and curious minds! The Autumn Budget 2024 has landed and we at Westerby Investment Management have summarized key takeaways in our latest post.💼 From unchanged tax elements to significant changes in Inherited Pensions, Capital Gains Tax Rates, and much more, our detailed review provides insight into how these changes may impact you.📈
Stay ahead of the curve, click the link to read our comprehensive review👇
https://westerby-investment.co.uk/autumn-budget-2024-review/
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