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2024 Autumn Budget Review

  • Almost four months after Labour won the general election, Chancellor Rachel Reeves has delivered her highly anticipated 2024 Autumn Budget, outlining the government’s plans for this tax year and beyond.
  • Arguing that the July general election had given Labour a “mandate to restore stability and start a decade of renewal”, Reeves described it as “a Budget to fix the foundations and deliver change”.
  • Deliberately many of the tax increases had already been leaked, and so far the response from investment markets has been minimal (unlike during the aftermath of Liz Truss’s Budget).
  • Against a backdrop of a manifesto pledge not to increase income tax, employee national insurance or VAT, Reeves announced that her Budget would raise taxes by £40bn, stating that any other chancellor would “face the same reality”.

 

How does this Budget affect you?

 

Personal Tax

  • No increase to income tax, no increase to VAT and no increase to employee national insurance.
  • No changes to the ISA regime, the Budget did confirm that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.
  • As of 30 October, the main rates of capital gains tax have increased. The basic rate has risen from 10% to 18% and the higher rate has increased from 20% to 24%. Whilst this is not good news, there was speculation that CGT could move up in line with income tax to 40% so I suppose, it could have been worse.
  • Reeves announced she was closing the “loophole” that gives pensions preferable inheritance tax treatment. She will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027. This is of particular relevance to anyone building their SIPP with the intention of passing it on to future generations.
  • The freeze on IHT thresholds will be extended by an additional two years, to 2030. The nil-rate band (the threshold below which an estate does not incur IHT), and residence nil-rate band will remain at £325,000 and £175,000 respectively.
  • With effect from 31 October 2024, the stamp duty surcharge on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland will increase from 3% to 5%.
  • As they had promised in their election manifesto, Labour announced that, from 1 January 2025, VAT will apply to all education, training, and boarding services provided by private schools.

 

State Pension

  • The basic and new state pensions will increase by 4.1% in 2025/26, in line with earnings growth, meaning over 12 million pensioners will receive up to £470 a year more.

 

Corporation Tax

  • Reeves increased employer national insurance rates by 1.2% from 13.8% to 15%, effective 6 April 2025.
  • Currently, employers pay NI only above a threshold of £9,100 a year. The chancellor reduced this threshold to £5,000 a year, effective 6 April 2025. The threshold will remain at £5,000 until 6 April 2028 and then increase in line with the Consumer Prices Index thereafter.

 

If any of the Budget gives rise to anything you would like to discuss with us, please don’t hesitate to get in touch.  The changes to CGT and pensions moving into IHT treatment are probably the most pertinent points.