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The 2024 Autumn Budget presented by Chancellor Rachel Reeves introduces several significant changes that will shape tax planning, investment strategies, and financial advice over the coming years.
We have outlined the key changes for you below:
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Changes announced to inheritance tax include:
Inheritance tax will apply to pension wealth that is transferable at death (unused pension funds and death benefits) from 6 April 2027. Pension assets exceeding the IHT nil-rate band (£325,000) will be taxed at 40%.
Whilst Defined Contribution (DC) pensions will be most affected, it's also important to review Defined Benefit (DB) schemes and lump-sum death benefits for potential IHT exposure.
There will be changes to how agricultural property relief (APR) and business property relief (BPR) work for inheritance tax:
Full (100%) relief will continue to apply up to a £1 million limit for the value of assets claimed under these reliefs, jointly.
Above this, there will be a new, reduced 50% relief.
Business property relief (BPR) on AIM (formerly the Alternative Investment Market) and other “not listed” shares will be reduced from 100% to 50%, and will not count towards the cap.
Inheritance tax is payable above nil-rate bands. The current freeze to the inheritance tax nil-rate band, at £325,000, and residence nil-rate band, at £175,000, will be extended for a further two years, to 2029/30.
We will understand more about the impact this change will have on pensions after the technical consultation phase ends in January 2025.
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The government has raised CGT rates, with the Basic rate moving from 10% to 18% and the Higher/Additional rate moving from 20% to 24%. These adjustments are likely to impact clients across the board, particularly those with substantial gains from investments or property sales.
This change makes it important to review client withdrawal strategies from their investments to make sure that they are as tax-efficient as possible.
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There will be a number of changes to employer National Insurance contributions (employer NICs) from April 2025:
The employer NICs rate will be increased from 13.8% to 15% of pay, above the secondary threshold.
The main threshold above which employer NICs is paid for an employee – the secondary threshold – will be reduced from £9,100 a year to £5,000 a year. It will remain at this level until 5 April 2028 and be increased in line with Consumer Prices Index (CPI) inflation after that.
Employment Allowance will be increased from £5,000 to £10,500. Employment Allowance allows employers to reduce the total amount of National Insurance they pay per year.
At present, Employment Allowance is only available to employers who have less than £100,000 in National Insurance liabilities. This restriction will be removed so larger employers will also be eligible.
This will particularly impact small and medium-sized enterprises (SMEs) and employers with a significant number of lower-paid staff, as more of their payroll will attract NICs.
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Education and boarding services provided by private schools will be subject to VAT at the standard rate of 20% from 1 January 2025. Previously, private school fees were VAT-exempt, providing a financial advantage for families choosing fee-paying education.
This could have a significant impact on any of your clients who either have school-aged children that attend private or independent schools, or for those clients who are saving for private school costs in the future. For example, if a family currently pays £20,000 per year in school fees, the additional VAT will increase the annual cost to £24,000—a £4,000 increase per child. For families with multiple children in private education, the financial impact will be even greater.
Alongside the VAT changes, the Budget removes business rates charitable relief for private schools in England from April 2025, subject to parliamentary approval. There will be legislation to come on this.
This means that private schools, which often receive substantial discounts on their business rates due to charitable status, will face higher operating costs, if the legislation passes in Parliament. As a result, private schools may pass these additional costs onto parents through increased fees.
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A higher rate of Stamp Duty Land Tax (SDLT) applies to purchases of additional residential properties by individuals, such as second homes, and to purchases of residential properties by companies, in England and Northern Ireland.
The main rate will increase from 3% to 5% above the standard rate of Stamp Duty Land Tax from 31 October 2024. This higher surcharge applies to both individuals purchasing a second property and companies investing in residential real estate.
For instance, if the standard SDLT rate for a property is 5%, a client purchasing an additional property would now pay 10% total (5% standard rate + 5% surcharge), compared to 8% under the previous rules. This increase could significantly affect the upfront costs of purchasing investment properties or holiday homes.
This measure does not apply to Scotland or Wales, where devolved land transaction taxes apply.
In September 2022, the Government announced a temporary increase to the thresholds above which SDLT must be paid. That temporary increase is due to end on 31 March 2025, meaning that any transaction which completes thereafter will be subject to the following increased rates of Stamp Duty:
The nil rate threshold which is currently £250,000 will return to the previous level of £125,000.
The nil rate threshold for first time buyers which is currently £425,000 will return to the previous level of £300,000.
The maximum purchase price for which First-Time Buyers Relief can be claimed is currently £625,000 and will return to the previous level of £500,000.
For more information, see HMRC, Stamp Duty Land Tax — increase to the higher rates on additional dwellings and to the single rate of tax on purchases by non-natural persons, 30 October 2024.
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As announced in July 2024, the Budget included changes to remove the universal eligibility for the Winter Fuel Payment. From winter 2024/2025, households will no longer be entitled to the payment unless they receive Pension Credit or certain other means-tested benefits.
The State Pension triple lock will be retained for the duration of this Parliament, as promised in the Labour Party’s election manifesto.42 This means the basic and new State Pension will increase by 4.1% in 2025/26, in line with average earnings growth. The Treasury estimates that over 12 million pensioners would receive an additional £470 each in 2025/26.
The National Living Wage for those aged 21 and over will be increased by 6.7% to £12.21 an hour from April 2025, implementing in full the Low Pay Commission’s recommendations. The government said this will affect over 3 million people. The rate for 18-to-20-year-olds will increase by 16.3% from £8.60 an hour to £10.00 an hour.
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This article is intended for UK financial advisers and advisory firms as general information only. This article does not constitute financial advice. The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief will depend on your client's individual circumstances. The information presented in this article is accurate as at 18th November 2024, but may not reflect subsequent legislative changes. Whilst we support financial planners and advisory firms, JG Paraplanning is not authorised and regulated by the Financial Conduct Authority. Clients should consult an FCA-regulated financial adviser for tailored advice.