What Does the Autumn Budget Mean for You?

October 2024

As expected, Rachel Reeves, the new Chancellor of the Exchequer, has confirmed that the government will be raising certain taxes. In her Budget delivered on the 30^th October 2024, she announced tax rises worth £40 billion. This is one of the biggest tax hikes in British history, second only to the Conservatives 1993 budget.

This new budget has been designed to address the circa £22 billion spending gap Labour say they inherited from the previous government. It is intended to fund a huge programme of investments in public services such as transport, the NHS and schools. The Labour party also expect these changes to drive future economic growth.

The government have stuck by their pledge not to raise what they are calling ‘working taxes’. This means there are not going to be any increases to PAYE taxes. However, depending on your circumstances, you may be affected by some of the taxes that are set to rise.

This includes:

• National Insurance Contributions (NIC) for employers.
• Inheritance tax (IHT).
• Capital Gains Tax (CGT).
• Stamp Duty Land Tax (SDLT).

Inheritance Tax changes

Inheritance tax (IHT) currently generates an income for the government of around £7.5 billion each year. This is set to increase under the new rules.

The current rate of inheritance tax is set at 40%. However, this only applies to assets above the nil rate band threshold (currently £325,000 per person) that are passing to non-exempt beneficiaries. There are various other exemptions and reliefs that can reduce the amount of IHT payable, which means that – as things stood before the new Budget – only 4% of estates pay any inheritance tax at all.

The changes announced in the Budget include:

• Freezing the £325,000 threshold beyond 2028 to 2030, which will bring more estates into the tax net.
• Reforms to agricultural property relief (APR) and business relief (BR). These reliefs will be less generous from April 2026. However, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, with the excess being allowed a reduced 50% relief.
• UK stocks listed on the Alternative Investment Market (AIM index) will now be allowed a reduced 50% IHT relief (with a 20% IHT rate applied).
• Pension death benefits will be included in inheritance tax calculations from April 2027.

The combined effect of these changes is expected to be a £2 billion increase in annual IHT revenues.

Capital Gains Tax (CGT) rates increased

The Chancellor announced an increase in the CGT rate paid by basic-rate taxpayers from 10% to 18%. For higher tax rate payers, this increase will be from 20% to 24%. These changes will be effective immediately and will bring CGT in line with the rate paid on residential property gains, where the rates remain the same.

The current annual CGT allowance remains the same at £3,000 per person, per tax year.

National insurance Contributions for employers changes

There have been some significant changes to employer’s National Insurance Contributions (NIC). These will now be levied on any worker’s earnings above £5,000, which is down from the previous threshold of £9,100.

In addition to the threshold change, employers will also be subject to a contributions percentage change. This will be increasing from 13.8% to 15%.

These changes are expected to raise an additional £25 billion per year.

Stamp Duty Land Tax

There will be no changes to the current Stamp Duty Land Tax (SDLT) rules for those buying their first home or moving to a new primary home.

However, the SDLT surcharge due on the purchase of second homes will rise from 3% to 5%. The new rate will apply on any second home purchase from the 31^st October 2024 onwards.

Overhaul of the current non-domicile rules

The current non-domicile rules will end in 2025. These will be replaced by a new, residence-based regime in order to limit the tax benefits that are available to individuals who live in the UK but are legally domiciled elsewhere.

The government anticipate that this change could raise £12.7 billion over the next five years.

Previously confirmed changes

The taxation changes that have been announced in the Autumn Budget will take affect alongside changes that have previously been confirmed.

These changes include:

• The introduction of VAT on private school fees. This will come into effect from 1^st January 2025.
• The abolishment of the furnished holiday lettings tax relief (FHL). This will come into effect from April 2025.

The government have also previously announced that they will be increasing HMRC’s resources. This will include employing an additional 5,000 members of staff to manage the administration of these rule changes.

Are you concerned about how this might affect you?

These latest changes to taxation rules might affect your plans for your future or your estate. With this in mind, now may be a good time to review any existing plans you have in place.

If you’re not sure how these changes might affect you, please don’t hesitate to get in touch. We’re always on hand to help you plan for the future, whether that’s for yourself, your family or your business.