Autumn Budget 2024: Highlights

It has been a long anticipated Budget from a personal tax perspective, with the expectation that Rachel Reeves would introduce substantial changes to increase taxes.

As highly anticipated the government have increased Employer Class 1 National Insurance and the National Living Wage having the biggest impact for businesses in the short term. They also as planned introduced VAT on private school fees.

Below we discuss the main changes for private clients.

Capital Gains Tax (CGT)

One of the most immediate and substantial changes was an increase in CGT.

• The lower tax rate – a rise from 10% to 18%,
• The higher tax rate – a rise from 20% to 24%,

The above increase however does not apply to gains on residential property.

Those disposing of a business or a significant shareholding via a sale or succession were able to claim Business Asset Disposal Relief (BADR) so that the first £1million of gain is subject to only 10% CGT. This is now going to increase to 14% from 6 April 2025 and match the lower rate of 18% from 6 April 2026.

Inheritance Tax (IHT)

In the run up to the announcement there was a lot of concern over the potential changes to IHT. It is important to note that:-

• The current IHT thresholds will remain unchanged until 5 April 2030 (£325,000 nil rate band plus £175,000 residence nil rate band) and therefore still not taking into account rising inflation.
• Inherited pensions will become subject to IHT from April 2027. Most pensions are currently exempt from an IHT and are not classed as part of an estate for Inheritance tax purposes.
• Assets that qualify for business property relief (and also agricultural relief) used to qualify for 100% relief from IHT allowing business owners to pass their business onto the next generation with no tax. From April 2025 the 100% relief will now only apply to the first £1million, falling to 50% thereafter.
• The changes to business property relief and agricultural relief will also apply to trusts holding these types of assets. Therefore, exit and ten year charges will be affected for relevant property trusts.
• The Chancellor also plans for the 50% relief to apply across the board from shares “not listed” on the stock exchange, like AIM.

Stamp Duty Land Tax (SDLT)

The Higher Rates for Additional Dwellings (HRAD) surcharge on SDLT will be increased by two percentage points, from 3% to 5% for those buying second homes. This will be effective from 31 October 2024. The increase in tax rate is intended to give first time property buyers an advantage.

Abolishment of ‘non-dom’ Regime

As planned and reported previously the current non-dom tax status will be abolished from 6 April 2025.

In its place there will be the new Foreign Income and Gains (FIG) Regime that offers 100% relief on foreign income and gains for new arrivals to the UK during their first four years of tax residence whether or not they remit the income to the UK, provided they haven’t been UK tax residents in the previous 10 years.

Temporary Repatriation Facility for ‘non-doms’ claiming the remittance basis will allow ‘non-doms’ who previously claimed the remittance basis to continue to remit foreign income and gains at a reduced rate for three tax years, starting from 6 April 2025.

Final Thoughts

The Budget has been tough for small and medium sized business owners. With the increase in National Insurance and National Living Wage it has increased the ability for businesses to make a profit. In addition now the changes to CGT and IHT this only restricts the business owners ability to generate wealth from their enterprise and pass it on to the next generation.

With these changes it is now even more important to consider estate planning. If you would like to discuss these changes or your structures more generally, please contact GSC Solicitors LLP and we would be delighted to assist.

Written by James Cohen, Partner in the Private Client Team
For further information or to discuss your tax planning, please contact James Cohen at 0207 822 2222 or via email at [email protected]. James or a member of the Private Client team would be happy to assist with your estate planning and help you navigate the latest tax changes effectively.