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31 Oct 2024 | 3 minutes to read
Head of Financial Planning, Daniel Swift, considers the outcomes of the Autumn Budget and the potential considerations for financial planning.
Chancellor Reeves delivered the Autumn Budget on Wednesday, the first Labour budget in 14 years and the first in Britain’s history to be delivered by a woman. After plenty of speculation, this most recent fiscal announcement will introduce measures which Labour say will support working people, help boost growth in the UK over the long term and raise £40bn through a number of tax changes.
The Labour government’s biggest measure, aimed at addressing their debt ‘black hole’, is the increase to employer’s National Insurance Contributions by 1.2%. They’ll also be taking steps to support people with the cost of living, including increasing the minimum wage for over 21s by 6.7% to £12.21 from April 2025 and a separate increase for 18–20-year-olds. Additionally, Income Tax thresholds remain frozen until 2028 when thresholds will be brought in line with inflation.
It will be a relief for many to finally have some certainty and a clarity around this Labour government’s objectives. While we now have a clearer picture, a number of tax increases have been announced amongst the many new measures we saw on Wednesday, details of which may affect individuals’ financial plans.
From April 2027, inherited pensions will now be subject to Inheritance Tax (IHT). This is a significant change to pension legislation. The details of this change, and how it may affect individuals in the long term still needs to be properly explored.
Currently, most inherited pensions aren’t subject to IHT if they are passed on as they are not classed as part of an individual’s estate when they pass away.
There are no changes to what individuals can withdraw, tax free, from their pensions. Currently the lump sum withdrawal remains at 25%. The annual allowance and tax relief on pension contributions will also remain the same. This re-affirms pensions as an efficient way to save for retirement.
In her statement, Chancellor Reeves confirmed that the lower CGT tax rate will rise from 10% to 18%, and the higher CGT tax rate will increase from 20% to 24%.
Positively, these changes are less of an increase than was speculated, however they will take immediate effect, from 30 October 2024. The annual exemption remains unchanged.
Chancellor Reeves announced the freeze on Inheritance Tax will be extended to 2030 meaning more estates are likely to exceed the nil rate band over this time period.
The government will reform agricultural property relief and business property relief from April 2026, with the Chancellor suggesting that the Government would be taking a ‘balanced approach’ to these changes.
The first £1m of combined business and agricultural assets will continue to be free of IHT. For assets over £1m, IHT will apply with a 50% relief at an effective rate of 20%.
The government will also reduce the rate of Business Property Relief available from 100% to 50% for shares on the Alternative Investment Market (AIM).
This effectively sets a new tax rate of 20% tax, adjusting the relief though not removing it entirely, as was rumoured.
The Chancellor also said that these changes will raise more than £2bn by the end of the forecast period.
ISA subscription limits remain unchanged and will be frozen until 5 April 2030. As a reminder, these are:
The Chancellor confirmed that the ‘British ISA’ which was floated in March’s Spring Budget will not go ahead and the rumoured cap on accumulated ISA savings has not materialised.
From 5 April 2026, employers will pay more in NIC with the government increasing this tax by 1.2 percentage points, from 13.8% to 15%.
In addition, the threshold at which National Insurance is paid by employers on employees’ salaries will reduce from £9,100 per year to £5,000. The Chancellor said she expects that these amendments to National Insurance will raise £25bn a year by the end of the forecast period.
The fiscal announcements, including tax changes, in Labour’s Autumn Budget may have implications for your personal finances depending on your situation. The implementation dates of these fiscal changes vary, some taking immediate effect and others taking longer to change – a few into next year and beyond.
In this time of change, understanding the details of these new budget measures is important and the value of good financial planning remains. This may be an opportunity to revisit your financial plan and ensure you make use of allowances available to you.
Please note that any tax benefits will depend on your personal tax position and rules are subject to change. The value of investments can go down as well as up, and you may get back less than you invested.
Important information
The information contained in this document is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.
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