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Key announcements from the UK Autumn Budget 2024

As we navigate through changes in the financial markets, it's important to understand the latest economic policies and how they might affect you. The Chancellor's Autumn Statement gives us key insights into the government's financial plans and economic outlook. In this summary, we will point out the main parts of the statement and explain what they mean for you and your investment goals.

The UK Autumn Budget 2024, delivered by Chancellor Rachel Reeves, introduced several significant changes that could potentially impact you and your finances, particularly in the areas of pensions, inheritance tax (IHT), and capital gains tax (CGT).

Pensions

One of the most notable announcements in the budget were changes to the tax treatment of pensions in relation to inheritance tax. The budget introduced measures to include pensions within the scope of IHT. This means that pension pots from April 2027 will be considered part of an individual’s estate for IHT purposes.

Additionally, the government has committed to maintaining the pension ‘triple lock’. This means that the basic and new state pensions will rise by 4.1% in 2025-26. This increase ensures that pensions keep pace with inflation and wage growth, providing a more stable retirement income for pensioners.

Inheritance Tax (IHT)

In addition to the above, the budget also brought other changes to inheritance tax.

Agricultural property relief and business property relief will be reformed from April 2026. 100% rate of relief will continue for the first £1m of combined agricultural and business assets, and 50% thereafter.

Business property relief rate to also decrease to 50% in all circumstances for shares “not listed” on a recognised stock exchange such as AIM.

The inheritance tax threshold freeze will be extended for a further two years to 2030. The threshold will remain at £325,000, or £500,000 if the estate includes a qualifying property and passes to a direct descendant.

These changes, will mean more estates may potentially be subject to IHT, highlighting the importance of early effective tax planning.

Capital gains tax (CGT)

The Autumn Budget 2024 introduced an immediate hike in the rates of capital gains tax. The higher rate of CGT has been increased from 20% to 24%, while the lower rate has been raised from 10% to 18%. However, the rates for residential property remain unchanged at 18% for lower rate taxpayers and 24% for higher rate taxpayers. This increase will affect investors disposing of assets, as they will now face higher tax liabilities on their gains.

No changes were made to the existing £3,000 CGT annual exemption.

Other changes impacting UK investors

  • In addition to the changes in pensions, IHT, and CGT, the budget included several other measures that could affect UK investors:

  • The freeze on income tax and personal National Insurance thresholds will not be extended beyond 2028. From 2028-29, this will update in line with inflation

  • Employer National Insurance Contributions (NICs): The budget announced an increase in the employer’s NIC rate from 13.8% to 15%, effective from April 2025. This change will increase the cost of employing staff, potentially impacting business profitability and investment returns.

  • The threshold at which businesses start paying National Insurance on workers’ earnings will also be lowered from £9,100 to £5,000. The NIC threshold freeze will not be extended beyond 2028. From 2028-29, this will be updated in line with inflation. For small businesses, the Employment Allowance is being increased from £5,000 to £10,500 and the £100,000 threshold removed.

  • Minimum wage increase: The national minimum wage will rise to £12.21 per hour from April 2025. While this increase supports low-income workers, it may also lead to higher operating costs for businesses, affecting their financial performance and investment attractiveness.

  • Non-Domiciled tax status: The budget abolished the remittance basis of taxation for non-UK domiciled individuals, replacing it with a residence-based regime from April 2025. This change will affect ‘non-doms’ who previously benefited from favourable tax treatment on their foreign income and gains and for IHT on their worldwide assets.

  • A significant change announced in the budget is the removal of the VAT exemption on private school fees. From January 1, 2025, all education and boarding services provided by private schools will be subject to VAT at the standard rate of 20%. This measure aims to raise additional revenue to support public finances and ensure fairness in the education system. However, it will increase the cost of private education, potentially impacting families who choose private schooling for their children.

  • Aiming to provide stability for savers, it was announced that the annual subscription limits for Individual Savings Accounts (ISAs) will remain frozen until April 5 2030. This means the allowance will stay at £20,000 for cash ISAs and stocks and shares ISAs, £4,000 for Lifetime ISAs, and £9,000 for Junior ISAs.

  • There will be significant changes to Stamp Duty Land Tax (SDLT), which is a tax paid on property purchases, particularly targeting second homes and buy-to-let properties. The higher rate for additional dwellings will increase from 3% to 5%, effective from October 31 2024. This reform aims to raise revenue while supporting first time buyers and those moving homes.

These changes highlight the importance of comprehensive financial planning and the need to seek professional advice in response to the new fiscal environment.

We hope this summary provides you with a clear understanding of the key points from the Autumn Statement and their implications. At Schroders Personal Wealth (ACD), we are committed to helping you understand these changes so that you can make informed decisions towards achieving your investment goals.

Important information

The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can go down as well as up. The benefits of your plan could fall below the amount(s) paid in.

In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.

Any views expressed are our in-house views as at the time of publishing. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without prior written content.

Schroders Personal Wealth (ACD) is a trading name for Scottish Widows Schroder Personal Wealth (ACD) Limited. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 11722983. Authorised and regulated by the Financial Conduct Authority under number 834833.