Autumn Budget 2024: Key takeaways

The Autumn Budget delivered by Chancellor, Rachel Reeves, contained a great many changes which will affect private individuals – from Capital Gains Tax (CGT) and Inheritance Tax (IHT), to major changes for non-doms from 6 April 2025.

We will provide more detailed information on the non-dom changes and IHT / trust changes but in the meantime, hope that you find the summary below helpful.

For help and support on the back of the Budget, don’t hesitate to get in touch with our Private Wealth & Tax team.

• Capital Gains Tax

CGT went up to 18% for lower rate payers and 24% for higher rate payers, effectively aligning with the already higher CGT rates for property sales.  This was, perhaps, not as bad as some had feared.

• Business Asset Disposal Relief (previously Entrepreneurs’ Relief)

This will rise from 10% to 14% for disposals on or after 6 April 2025, and to 18% for disposals on or after 6 April 2026. However, from 6 April 2026, it is effectively being abolished, which came as a surprise to many.

• Investors’ Relief

The Lifetime Limit is being radically reduced from £10m to £1m, for all disposals on or after 30 October 2024, as well as increasing the rate to 14% for disposals on or after 6 April 2025 and to 18% for disposals on or after 6 April 2026.

These changes will make Investors’ Relief much less attractive, before effectively abolishing it from 6 April 2026 when the rate aligns with the main CGT rate.

• Inheritance Tax (IHT)

The nil rate band is still frozen at £325,000 until 2030. This will bring yet more estates into paying IHT for the first time, as property prices increase.

• Agricultural Relief (APR) & Business Property Relief (BPR)

There is a new cap of £1m for 100% relief, shared between APR and BPR if both apply, then 50% relief thereafter.

This is a big and unwelcome surprise to anyone in the farming community but also to those owning unquoted trading companies.  Could this push more people to make lifetime gifts as a result? Time will tell.

• AIM etc shares

BPR is also being limited to 50% relief for any shares on AIM or similar markets (rather than a full stock exchange).

This was another unwelcome surprise, particularly for anyone who invests regularly in AIM companies.  It is also likely to affect ‘packaged’ IHT saving portfolios, which tend to invest in the AIM market.

• Air Transport Duty

The 50% increase in duty for private jets may be a little niche, but will certainly affect some!

• Income tax & NIC thresholds

It is good to hear these will finally be unfrozen and will start going up again with CPI, but only from 2028/29. This is still somewhat of a stealth tax, albeit with an end in sight.

• ‘Inherited’ pensions and death in service benefits

This came as a complete surprise, bringing unused pension funds and death in service benefits into the charge to inheritance tax (IHT) for the first time.

Previously, these have been exempt from IHT as they pass outside the estate.

From 6 April 2027, however, this will no longer be the case.

This may mean people need to review their financial planning, if they had deliberately left funds in their pension to pass IHT-free to their families.  It will be particularly unpopular with pension administrators, as they have to report to HMRC and pay the IHT due on the pension pot. This also seems to apply to certain offshore pensions.

• Stamp Duty (SDLT)

The additional SDLT paid on second homes or where companies purchase residential property is going up to 5% over the standard residential rates.

The new single SDLT rate for ‘non-natural persons’ buying any property over £500,000 will now be an eye-watering 17%. 

This is going to affect the buy-to-let market in particular, but also where a Trust is buying a property for a beneficiary to live in.

Supposedly, this is to free up housing stock for main home and first-time buyers, but only time will tell if that actually works. It will apply to any purchase on or after 31 October 2024.

• Carried interests

This represents a two-pronged attack on those who work in the finance sector and are given carried interests.

First, the rate of CGT is going up from 28% to 32% from 6 April 2025.  Second, from April 2026, the intention is to tax carried interests as trading profits, meaning they are subject to income tax rather than CGT.

Certain ‘qualifying carried interests’ will have a discounted tax rate as only 72.5% of the profits will be taxed.  A consultation is being launched to flesh out the details, such as whether there needs to be a minimum co-investment or time period.

• Non-dom changes

There are major changes coming in from 6 April 2025, as previously ‘trailed’, to abolish the remittance basis of taxation and remove the concept of domicile.

Many people fear this is likely to lead to non-doms leaving the UK, rather than paying UK tax on their worldwide income and gains.  A new 4-year ‘sweetener’ (known as the FIG rules) may not be enough to compete with other countries whose special tax regimes are for longer periods or are more generous.

• Overseas Workday Relief (OWR)

This is being changed because of losing the concept of non-domiciled workers. It is increasing from three to four years for those who have come to the UK for the first time ever, or have been non-UK resident for at least 10 consecutive years before arrival.

• Inheritance tax IHT changes

No changes were announced to the 7-year rule and no gift tax allowance was brought in, despite some media reports suggesting they would be.

But a major change is to drop domicile as the basis for IHT and instead look at long-term residence, which is defined as being resident for 10+ years out of the last 20.

A new IHT ‘tail’ is unwelcome, which means clients will remain liable to IHT on their worldwide assets, even when they’ve left the UK, if they were long-term resident when they left. Could this prompt more people to leave the UK before 6 April 2025, so they are subject to IHT for less time under the current rules?

• Offshore Trusts

Ancillary to the non-dom changes and moving to a long-term residence basis for IHT, many offshore trusts that have UK based settlors are going to be adversely impacted.

The trust will effectively be transparent for income tax and CGT, for the settlor, and the IHT charges that previously only applies to UK trusts will now apply to offshore trusts with UK long-term resident settlors.

This is going to add an additional burden on offshore trustees, who are likely to need to charge more for running any trust with a UK settlor. The fact these rules will apply even when the trust was set up prior to the settlor moving to the UK may feel particularly unfair.

For help and support with any of the issues discussed in this article, get in touch with our team of private wealth & tax lawyers.