Key Financial Planning Takeaways from the 2024 Autumn Budget

Some Key takeaways from yesterday’s Budget that may affect your financial planning.

 

Investment Planning and Capital Gains Tax (CGT):

• With immediate effect CGT rates are changing – Basic Rate is up from 10% to 18% and Higher Rate from 20%-24%.
• Property rates remain the same at 18% and 24%.
  • Using your annual CGT and ISA allowances becomes increasingly important.
• For Business owners there are considerations regarding Business Asset Disposal Relief (BADR) payable when you exit your business. Whilst the £1m allowance is maintained the CGT rate changes mean the 10% rate will increase to 14% in 2025 and 18% in 2026.
  • If you are thinking of a business sale, then planning is key.
• Rumoured dividend rate increases to align with income tax levels and capping the amount of ISA benefit that can be built up did not happen – a positive for investors.
• Allowances for CGT, Dividends and ISA contributions all remain the same and EIS and VCT schemes continue.

 

Inheritance Tax and Estate Planning:

• Allowances remain frozen till 2030, so the Nil rate band of £325,000 and Residential Nil Rate band of £175,000 remain in place to plan with, the below changes will come into effect after these bands have been utilised.
• Spousal exemption continues, meaning married couple can pass their estate to one another on first death with no IHT due.
• The gifting rules have not changed as rumoured, and the 7-year rule still applies.
• Unused  ‘Money Purchase’ or Defined Contribution pension pots will become liable for Inheritance Tax from 2027 (except if passed to a spouse), death benefits with a Defined Benefit/Final Salary pension are already taxable.
• Agricultural and Business Property Relief rates are now capped at a combined £1m to benefit from 100% relief from IHT and, thereafter, 50% relief (a tax rate of 20%).
• AIM shares are now subject to 20% IHT regardless of value.
  • The need to understand your allowances, how they will be applied and your lifetime cashflow modelling for retirement and what potential estate may be left on death has now become an even more important part of estate planning.

 

Pensions:

• Rumours were rife that 25% tax free cash and pension tax relief at the marginal level of income tax would be lost, they all remain in place.
• The only change is that, from April 2027, unused pension funds will be subject to inheritance tax.

As with all financial planning, how these rules impact you will be different for each reader so please do not take this post as financial advice, but reach out and lets have a conversation and see how we can help you plan.

 

Important Information

The above information is for educational purposes and is not a personal recommendation or investment advice. Content is accurate at time of writing. Tax limits and pension regulations may change. Wise Investment is authorised and regulated by the Financial Conduct Authority (FCA 230553). .