In this update, MacDonald Partnership and Integrity365 CEO, Matt Goy, discusses some of the key points within the 2024 Autumn Budget statement for clients to pay particular attention to which could impact financial planning arrangements.

Yesterday afternoon, Chancellor Rachel Reeves delivered Labour’s first budget in 14 years. Whilst we were warned in advance that this would involve “difficult decisions”, we now know this to be in the form of a £40bn raise in taxes – one of the biggest tax raids in history. For our clients, we have picked out some important points to note that could impact financial planning arrangements below.

Whilst the speculated changes to tax-free cash did not come to pass in the budget, pensions did see one of the most significant updates to impact financial planning announced in relation to Inheritance Tax (IHT).

Currently, pensions are exempt from IHT and do not form part of the taxable estate when someone passes away, making them a useful tool for intergenerational wealth planning. Pension death benefit rules mean there is no tax to pay for any recipient if the member dies before the age of 75, but if after age 75 then the beneficiary pays Income Tax at their marginal rate.

However, the Chancellor announced that from 6th April 2027, when an individual dies with unused pension funds or entitlements, these will become part of that person’s estate and may be liable to Inheritance Tax. This means that individuals will now have to look at their long-term financial plans and work with their financial advisers to re-assess their strategies for accessing their money at retirement, as well as how they plan to pass wealth on to future generations.

The changes to Business Property Relief (BR) and Agricultural Property Relief (AR) rules are possibly the biggest and stealthiest changes announced within the budget.

Currently, these reliefs are subject to a lower tax rate than the standard 40% IHT tax charge – typically 0% or 50%. However, the government’s reform of Agricultural Property Relief and Business Property Relief from April 2026 sees the 100% rate of relief reduce to 50% after the first £1 million of combined agricultural and business assets, in hopes to help protect smaller family farms and businesses. The government will also reduce the rate of business property relief to 50% in all circumstances for “not listed” shares on the markets of a recognised stock exchange, such as AIM.

Currently, there is no limit to the BR or AR that an estate can claim – so, for a typical UK business worth more than £1 million, the impact of this budget is significant as their estates will pay an additional 20% tax above the £1 million.

AIM listed shares which currently benefit from BR relief and can be held within an ISA were also widely speculated to change in the lead-up to the Autumn Budget. These will be subject to relief at 50% of BR and therefore subject to 20% IHT taxation from April 2025. However, further details are yet to be released on whether this impacts the BR limit of £1 million or if the ISA wrapper benefit is being removed, and therefore we await further clarification on this topic.

On a positive note, the EIS and VCT schemes were further backed by Labour which we warmly welcome.

Attention must also be drawn to employers’ National Insurance (NI) which is increasing by 1.2% to 15% from April 2025. In addition, the NI threshold will drop from £9,100 pa to £5,00 pa, and the employment allowance will rise from £5,000 to £10,500.

Changes to NI are not only noteworthy for business owners who face increased costs, but experts predict this will also have a knock-on effect to employees where staff reviews and remuneration are concerned as a result.

Discussion of changes to Capital Gains Tax has been a hot topic over recent years, with the previously announced reduction of the CGT allowance, as well as many speculating that CGT rates could increase to Income Tax levels. Therefore, it was unsurprising to hear the confirmed changes within the Autumn Budget, however the new rates are lower than anticipated.

Instead, the lower rate increased from 10% to 18%, and the higher rate from 20% to 24% – although CGT on residential property will remain at 18% and 24%. CGT rates on carried interest will also increase from 28% to 32% as of April 2024.

Chancellor Rachel Reeves also confirmed the removal of VAT exemptions on private schools, which will see the VAT on fees introduced in January 2025 as planned and a removal of business relief from April. This will undoubtedly have an impact on education commitments, however, our team are here to help clients devise a strategy to manage the impact of those future cost increases.

As further details, timescales and information are released by the government, we can begin to plan ahead with these changes in mind and update plans, where appropriate, in line with your long-term goals. In the coming weeks we will be sharing relevant articles, webinars and podcasts to navigate the changes announced and discuss the potential impact to clients. Please feel free to join these sessions or speak to your MacDonald Partnership adviser for further details.

Please do not hesitate to get in touch with a MacDonald Partnership Independent Financial Adviser on 01463 242 242 if you would like to discuss your own financial planning requirements. 

Click below to download your copy of our comprehensive summary guide to the Autumn Budget statement: