Autumn Budget 2024

Rachel Reeves has introduced the newly-elected government’s spending plans in her first budget as Chancellor of the Exchequer, and with it came a raft of changes to personal finance legislation. While the finer details of the Chancellor’s budget plans will soon be known, we’ve summarised the main changes introduced in yesterday’s speech below.

Capital Gains Tax (CGT)

CGT, which is paid on profits made when you sell an asset that's increased in value, will see an increase in rates immediately. From 30^th October 2024, the rate paid by basic-rate taxpayers will rise from 10% to 18%, and higher/additional-rates will rise from 20% to 24%. CGT on residential property-related gains, excluding those on made on your main residence, will remain at 18% and 24% for lower and higher rates respectively.

Business Asset Disposal Relief, also known as Entrepreneur’s Relief, reduces the CGT paid when certain business assets or shares are sold. Currently, the first £1 million of business assets sold is subject to the 10% rate of tax. Reeves announced that the £1 million threshold will remain, however the rate will increase from 10% to 14% in April 2025, then 18% in April 2026. Business asset disposals above the £1 million threshold will be subject to the higher rate of CGT.

Inheritance Tax (IHT)

IHT is paid when a person’s estate is above certain thresholds and is generally charged at a rate of 40%. Currently, the standard threshold is set at £325,000 per person and this had previously been frozen until 2028. The Chancellor announced today that this freeze will be extended by two years to 2030. There is no change to the rate of IHT. This will also apply to the additional allowance of up to £175,000 per person available where the main residence is passed to direct descendants.

From April 2027, inherited pensions will be included in a person’s estate when calculating IHT. Under current rules, pensions can pass on to beneficiaries free of Inheritance Tax.

Agricultural Property Relief and Business Property Relief, which allow certain assets to pass on free of Inheritance Tax on death, are to be reformed. From April 2026, only the first £1 million of these assets will pass on with no IHT, and assets above this threshold will be subject to a reduced rate of 20% rather than 40%.

Similarly, shares held in companies listed on the Alternative Investment Market (AIM), which currently can be inherited free of IHT, will also be subject to a reduced rate of 20% on death, presumably from April 2026.

Other Taxes

• The Chancellor confirmed there would be no change to Income Tax, Employee National Insurance contributions and VAT. However, she confirmed that thresholds for Income Tax will continue to be frozen until tax year 2028/29, at which point they will rise with inflation.
• Corporation Tax, paid by businesses, will be kept at 25%. However, Employer National Insurance contributions will increase from April 2025, rising from 13.8% to 15% starting at a lower threshold of £5,000 rather than £9,100.
• VAT on private school fees will be applied from January 2025.

The Chancellor’s plans to raise tax revenue highlights the importance of proper financial planning, and Carbon Financial Partners are well-placed to provide personalised advice for those who may be impacted. If you would like to discuss how today’s announcements affect you, or any wider financial planning needs, please get in touch.

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

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