Personal Taxes

• Income Tax, National Insurance (NI) and VAT: In a notable move, the freeze on income tax and NI thresholds since 2021/22 will not extend beyond 2028, aiming to shield working people from future financial strain. VAT also remains unchanged but will apply to public school fees.
• Inheritance Tax (IHT): The IHT threshold freeze will continue for an additional two years until 2030, allowing the first £325,000 to remain tax-free. This will increase to £500,000 if direct descendants receive the family home and £1 million for a married couple.
• Sticking with the topic of IHT, changes were also announced for Agricultural Property Relief and Business Property Relief. Currently, there’s no cap to these reliefs. However, from April 2026, it will only be available on the first £1m of qualifying assets. After that, the relief will apply at 50%. That effectively means that any qualifying assets will have no IHT on the first £1m, and the rest will be subject to IHT at half the usual rate: 20%. 
• AIM-listed shares will also be eligible for the 50% IHT relief, creating an effective rate of 20% IHT.  
• Capital Gains Tax (CGT): With immediate effect, taxes for higher-rate taxpayers on assets like shares will rise from 20% to 24%, while basic-rate taxpayers will see an increase from 10% to 18%. Residential property CGT rates will hold steady at 24% and 18%, creating a more simplified CGT system. 
• Another change to CGT was made to Business Asset Disposal Relief (BADR), which is still known to many as ‘Entrepreneur’s Relief’. The relief at £1m remains unchanged, but the tax rate will increase from 10% currently to 14% in 2025 and again to 18% the year after. 
• Stamp Duty Land Tax (SDLT): If you buy a second home or investment property, you already have to pay a ‘surcharge’, which is an extra layer of SDLT. With immediate effect, that’s increasing from 3% to 5%. 
• Non-Domicile tax: The non-dom tax regime will be abolished in April 2025 and replaced by a residency-based scheme.  

Pensions 

• IHT on pensions: From 2027, subject to consultation, unspent pension funds and death benefits will be included within the estate value for IHT purposes. Full exemptions apply for transfers between spouses/civil partners. The exact details of how this will work have yet to be confirmed. 
• State Pension increases: The Government confirmed the state pension will increase by 4.1% from April 2025. The headline single-tier state pension will likely rise from April 2025 to £230.25, up from the current £221.20 a week. The maximum basic state pension paid to those who reached state pension age before 6 April 2016 is currently £169.50 a week, and it will likely increase to £176.45 a week. 

Business taxes 

• Employer’s National Insurance (NI): Employer NI contributions will rise by 1.2 percentage points to 15% starting April 2025. Additionally, the threshold for employer NI contributions will drop from £9,100 to £5,000 annually. However, the government also extended the Employment Allowance from £5,000 to £10,500, which means some smaller employers may not pay NI at all or pay the same or less than what they did before. 
• Corporation Tax: The main rate of Corporation Tax, paid by businesses on taxable profits over £250,000, is to stay at 25% until the next election 

Fuel and alcohol duties 

• Fuel duty cut extension: Rachel Reeves said increasing fuel duty would be the “wrong choice,” so the 5p cut will continue for another year until 22 March 2026. 
• Alcohol duties: A 1.7% tax reduction on draught drinks will come into effect, while other alcohol taxes will increase in line with the Retail Price Index (RPI). 

Economic outlook 

• Growth projections: The Office for Budget Responsibility (OBR) projects UK economic growth to be 1.1% this year, 2% next year, and 1.8% in 2026. 
• Inflation: Inflation is expected to average 2.5% this year, slightly rising to 2.6% next year before easing to 2.3% in 2026. 
• Public borrowing: The OBR forecasts public sector net borrowing will reach £105.6 billion by 2025-26. 

What does the Autumn Budget 2024 mean for you? 

The Autumn Budget 2024 introduced significant financial adjustments across several areas. Here’s a closer look at how these changes may impact your financial plans: 

Business owners: Employers NI 

The change that has the greatest impact on most business owners relates to NI. This comes in two parts. First, the rate of NI employers pay on employees’ salaries is increasing from 13.8% to 15%. Second, the salary band at which NI becomes due is decreasing from £9,100 to £5,000. That means more of the employers’ monthly salary bill is going to be subject to NI and at a higher rate. That increase comes in from April 2025.  

The impact we expect to see is for employers to encourage ‘salary sacrifice’ pension contributions as a default because this will reduce the NI bill without any detriment to the employee. We think it’s also likely that in people-heavy businesses, we might see lower pay increases next year or smaller bonus packages.  

Most business owners are advised to take a tax-effective salary from their business of £9,100 a year so they don’t have any NI to pay. From next April, they may be advised to reduce this to £5,000 and take the rest as dividends. The best approach will depend on their overall tax position.  

Business owners: Minimum Wage Increase

To support the cost of living, the legal minimum wage for those over 21 will rise from £11.44 to £12.21 per hour in April 2025, which will increase costs for business owners further on top of the NI hike. 

Business owners: CGT changes 

The changes to the rates of BADR from next year mean business owners selling their businesses face higher taxes. Also, keeping the relief at £1m is another way to increase tax revenue, as it hasn’t been adjusted in years despite the rising cost of living and growing business values.  

We aren’t wholly surprised by this tax increase, but it does feel like a kick in the teeth for business owners. Selling a business represents a life’s work, and getting to the point of selling won’t have been easy. 

For those in that situation, there are some planning options still available, including somewhere capital gains can be ‘held over’ and effectively deferred until later. The basics should also still be covered, such as splitting shares in business between spouses or civil partners to make use of both allowances where possible. 

Business owners: IHT changes 

From April 2026, Business Property Relief and Agricultural Relief will only be available on the first £1m of assets. After that, the relief will apply at 50%. That effectively means that any qualifying business or agricultural assets will have no tax on the first £1m, and the rest will be subject to IHT at half the usual rate: 20%.   

This cap is a big deal for family business owners, farming families and investors. One solution could be to introduce life insurance for the amount of IHT, so the business or farm doesn’t need to be sold on death to pay the tax bill. We might see more businesses and farms passing down generations more quickly, but with CGT applying on the value, there are a lot of factors to bear in mind. 

IHT and pensions

From 2027, pensions will be included within estates for IHT purposes. Currently, pensions sit outside IHT calculations, but this shift could affect estate planning strategies.  

This change to pensions is a really big one that will impact most people’s financial plans. For people in retirement, this could mean a change of income strategy is needed. Some action may be required for people trying to minimise IHT. And for people saving for the future, we will need to pause to check if the plan to pay into your pension is definitely the right thing to do.  

Personal taxes: Extended IHT threshold freeze

The good news is that the amount you can leave free of IHT to your family hasn’t altered. Everyone still has a £325,000 allowance, and that increases to £500,000 per person for many people who own their main property. That means many couples with children can leave £1m between them, completely tax-free.   

Unfortunately, this is where the good news stops, as the government announced the extension of the freeze on IHT thresholds will last another two years until 2030. While this might seem manageable, the main threshold has remained at £325,000 since April 2009. The additional residence nil rate band introduced in 2017 was a welcome relief, but it, too, has been frozen since 2020. By 2030, all IHT thresholds will have remained unchanged for a decade, even as asset values have continued to rise—meaning that as your assets appreciate, more of your wealth may be subject to IHT. 

Business rate relief

Businesses in the retail, leisure, and hospitality sectors will see a reduction in business rate relief, dropping from 75% to 40%. This could potentially impact cash flow and budgeting as the cost of going out or purchasing goods goes up as a result. 

Capital Gains Tax (CGT) updates

Prior to the Budget, CGT rates stood at 10% for basic-rate taxpayers and 20% for higher-rate taxpayers. The changes made in the Autumn Budget 2024 harmonised all assets in line with the pre-existing CGT rates for the sale of residential properties.  

Whilst this simplifies the CGT system, it means that certain investments, including shares or General Investment Accounts, will start to incur more tax as they grow and as gains are realised when sold. We can shield that to some extent by using ISAs or other tax wrappers and being smart about the timing of gains being crystallised. But it might be time to rethink your savings plans or start using the tax-free allowance more strategically. 

Stamp Duty changes

The stamp duty surcharge on second homes and buy-to-let properties has increased from 3% to 5% as of 30 October 2024.  

We suspect that for people considering buying a holiday home to use personally, it won’t change their plans materially. However, for property investors who routinely buy and sell properties, it is a blow and will eat into their profits, which have already been much harder to come by in recent years. This could discourage new purchases among landlords, potentially constricting rental supply, which may, in turn, drive up rents. 

New VAT on private school fees

From 1 January 2025, private school fees will be subject to VAT at the standard 20% rate, a policy that may impact financial planning for families with children in private education. 

Each of these changes could influence financial planning decisions, from inheritance strategies to investment and spending choices. It’s worth reviewing these updates in light of your own financial goals and consulting a financial planner if needed. 

Want to know more?

Fill in the form below to download our comprehensive guide on the 2024 Autumn Budget:

In the meantime, if you have any questions about your finances or how the budget changes affect your situation, please get in touch with one of our team.

Sources:

https://www.bbc.co.uk/news/articles/cdxl1zd07l1o

https://news.sky.com/story/budget-2024-the-key-announcements-in-chancellor-rachel-reevess-speech-13244521

Budget 2024 summary: Key points from Rachel Reeves’s speech – BBC News