Autumn Budget 2024

Now the dust is settling after the first Labour Budget in 14 years, we consider the headlines and how these may affect clients in the future….

Autumn Budget 2024: Key Updates and Financial Implications

The 2024 Autumn Budget introduced significant changes in Inheritance Tax (IHT) treatment for pensions, Capital Gains Tax (CGT) rates, and Inheritance Tax reliefs for business and agricultural assets. We’re closely examining these developments to ensure your finances remain aligned with your goals. Together, we’ll approach these changes with a considered strategy, and we’ll discuss any potential adjustments at your next planning meeting. No immediate action is required, as we have time to adapt your portfolio in light of the new rules.

 Pensions now subject to Inheritance Tax (IHT)

Perhaps the most impactful change is that pensions left to beneficiaries will now fall within the scope of IHT. Historically, pension funds passed outside of an estate, allowing family members to inherit them without an IHT liability. Now, inherited pensions may face up to a 40% tax, which could significantly affect the amount passed down.

 With this new treatment of pension assets, careful planning will be essential. We will shortly be attending forums/webinars with other expert professionals to discuss the options available to clients in the future.  We’ll help assess how this change might affect your estate, particularly if your pension forms a substantial part of your legacy. Strategies around pension withdrawals, and other asset transfers, will be essential, especially as the rules take time to implement.

Increase in Capital Gains Tax (CGT) Rates

Capital Gains Tax rates have risen, with new rates in effect from 30th October 2024. Basic-rate taxpayers now face a CGT rate of 18% (up from 10%), while higher-rate taxpayers see their CGT rise from 20% to 24%. This increase applies to gains on assets such as second properties, investments, and other capital assets, potentially impacting those with larger investment portfolios or clients who plan to sell assets soon.

With these increased CGT rates, managing and potentially restructuring portfolios may become essential to minimise exposure. We’ll continue to work with you on strategies like using tax-efficient accounts, utilising losses, and assessing the timing of sales to help manage the impact of these increased rates. By maintaining tax efficiency, we aim to preserve the value of your portfolio, wherever possible, as we navigate these changes.

Revisions in Inheritance Tax Reliefs on Agricultural and Business Assets

Changes to IHT reliefs for business and agricultural assets mark a shift in the generational wealth transfer rules and have already proved increasingly unpopular especially to the farming community. Agricultural Property Relief and Business Property Relief have traditionally allowed family businesses and farms to transfer assets across generations with minimal IHT. However, the government’s reforms from April 2026 sees the 100% rate of relief reduce to 50% after the first £1 million of combined agricultural and business assets.

If you hold agricultural land or a family business, these changes could affect your estate planning. Working with other professional partners, we’ll help assess potential implications and explore options such as lifetime gifting or ownership restructuring to reduce IHT exposure. This review will focus on maximising the legacy you wish to leave for your family.

National Insurance (NI) Employer Contribution Increase

Employers will see National Insurance contributions rise to 15% from April 2025, up from 13.8%, for earnings over £5,000. This change may have implications for business owners but is unlikely to impact personal financial plans directly. For business clients, however, this increase may influence payroll and operating costs, so please let us know if you would like to discuss the impact of these changes.

A long-term, adaptable approach to your Financial Plan

As tax and regulatory landscapes shift, it’s natural to feel uncertain about the effect on your finances. With each client’s portfolio, we’ll take a tailored approach, ensuring your financial plan remains robust and aligned with your personal goals. With time to plan, our priority is strategic adjustments rather than immediate changes. The benefit of working together is that we can adapt to evolving legislation, helping protect your wealth and keeping you on track to achieve your goals.

If you’d like to discuss these updates further, please don’t hesitate to contact us.  We will, of course, be addressing these with you as your meetings fall due or we think more urgent action is needed.