Autumn Budget Update
Yesterday, Rachel Reeves delivered the Autumn Budget, and as Sir Keir Starmer and Reeves had hinted, it was indeed a 'painful' one. As always, some of the changes were anticipated, while others could have significant implications for long-term financial planning. Over the coming weeks we’ll be digesting this and guiding our clients in navigating the new landscape. For now, here's a brief summary of the key points we learned.
If you’re concerned about where the budget leaves you, and want some guidance on where to go from here, you can book a call with us here to chat through your situation.
Capital Gains Tax
Starting immediately, the Capital Gains Tax rate has increased. Here's what that means:
Basic-Rate Taxpayers: CGT has gone up from 10% to 18%.
Higher-Rate Taxpayers: CGT has increased from 20% to 24%.
This is a significant change and means that it’s more crucial than ever to consider strategies like using tax-efficient wrappers or spousal transfers to minimise exposure to these higher rates.
Inheritance Tax
The inheritance tax nil rate band, frozen at £325,000 since April 2021, will remain that way until April 2030. With property values still climbing, more households may find themselves caught in the IHT net.
From April 2027, inherited pensions will be subject to IHT. With a significant portion of inheritance tax planning focused on retaining the value of one’s estate inside the IHT shelter of a pension, for many this change will require a new strategy when it comes to retirement income and IHT planning.
There are additional IHT changes to be aware of:
Business and Agricultural Assets: From April 2026, the first £1 million of combined business and agricultural assets will continue to be exempt from IHT. However, assets exceeding this threshold will have only 50% relief, effectively raising the tax burden to 20%.
Alternative Investment Market (AIM) Shares: Relief on AIM shareholdings will also drop to 50%.
Employers National Insurance
Another big change announced is the increase in employers' National Insurance contributions:
Rate Increase: From April, the rate will jump from 13.8% to 15%.
Threshold Adjustment: The secondary threshold at which employers will have to pay National Insurance will be lowered to £5,000, amplifying the impact on businesses. Employers may need to rethink wage policies, explore technological efficiencies, or find other cost-saving measures.
These changes will undoubtedly put pressure on business owners, and have a knock on effect on employees.
Stamp Duty Surcharge
The cost of purchasing additional properties has risen. Effective from 31 October, the surcharge on buying a second or additional home will increase from three percentage points to five.
Overseas Transfer Charge on Pensions
From now on, transferring a pension to a qualifying scheme in the EEA or Gibraltar will attract a 25% charge unless the saver resides in the same country. This could be significant for those considering retiring abroad.
Triple Lock Confirmed
The triple lock on state pensions remains intact, with a 4.1% increase from April 2025. This means the weekly state pension will rise from £221.20 to £230.30. However, some pensioners will lose the Winter Fuel Allowance this winter, partially offsetting this increase.
Income Tax Thresholds
Tax thresholds will remain frozen until April 2028, meaning that many will continue to be pushed into higher rate tax brackets. Until then, measures like pension contributions or gift aid can be crucial in managing your income tax position.