Autumn Budget 2024: A financial planning perspective

Following weeks of speculation, on Wednesday afternoon Chancellor of the Exchequer, Rachel Reeves, presented the Labour government's first budget of their new term. Leading up to the budget we saw increasing tremors through the financial industry, with large Capital Gains Tax (CGT) hikes and changes to pension lump sums being major concerns, alongside a raft of other rumoured changes.

However, although there were some major overhauls announced throughout the budget, there were only a few key changes impacting general financial planning, namely CGT rates, business and agricultural relief and pension inheritance rules. As such, the focus of this update today will be on these three main areas.

We are continuing to digest these changes and pick apart the finer details of the full report, alongside our colleagues in the finance industry, as well as other professional services. As this clarity comes, we will be reaching out to everyone who has been directly impacted by these changes to discuss updates to their financial planning.

Pensions

Pensions were heavily discussed in the lead up to the budget, particularly the removal of tax-free cash. However, what was announced was the movement of pensions back inside estates for inheritance tax purposes (as of April 2027), with the aim of targeting individuals who had planned on using pensions as inheritance tax vehicles rather than as a means to support retirement income. This change will have a significant effect on many and will also change the planning originally put in place.

Going forward we will assess the most efficient way to navigate the various tax implications involved and provide options for achieving inheritance objectives.

We will await further clarity on how this affects tapering of the resident’s nil rate band.

Business and Agricultural Relief

As part of the push to increase earnings from inheritance tax; Business Property Relief and Agricultural Relief saw the introduction of a combined £1m cap for 100% Inheritance Tax (IHT) exemption. Qualifying assets above this £1m cap will receive 50% relief, i.e. 20% IHT rate.

Investments in Alternative Investment Market (AIM) listed shares will now receive blanket relief of 20% which is down from 40% on qualifying shares. The AIM market reacted very positively to this news, having been heavily suppressed over recent weeks due to fears of the complete removal.

These changes will have brought a considerable amount of tax back to many individuals where these investments had been used for legacy and estate planning. As with pensions, we will be going back through these planning pieces and providing options for the most efficient planning to navigate these changes.

Despite the changes to these reliefs, we were very happy to see the continued support for Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs), from the perspectives of both small business owners in the UK and investors.

Capital Gains Tax

Heavily anticipated to see considerable hikes, changes to capital gains tax felt relatively soft comparatively. While there was a large raise in basic rate CGT from 10% up to 18%, higher rate only saw an increase from 20% to 24%. Business Asset Disposal Relief has also been increased in line with these changes, though this will come in as a stepped change - increasing to 14% from April 2025 and then up to 18% from April 2026.

In Summary

We have once again seen the benefits of holding steady and not reacting to speculation and fear mongering spread by the media. We will now look to address these changes with those individuals impacted and we will continue to provide updates where necessary once the dust has settled and the final details become much clearer.

If you have any concerns about how your planning may have been impacted, please do not hesitate to contact your adviser, or our team in the office.