UK Autumn Budget 2024 – What Can We Expect?
On Wednesday 30th October 2024, Chancellor of the Exchequer Rachel Reeves will deliver the Autumn Budget – the first from the new Labour Government. Here are our thoughts on some of the rumoured tax rises required to address the UK’s £20 billion deficit.
While Reeves has pledged not to raise income tax, national insurance or VAT, other tax increases and spending cuts may still be on the horizon, especially in light of a £22 billion shortfall, public sector pay rises, and other recent financial commitments. Though details will not be confirmed until the Budget is officially released, the new Government’s manifesto has hinted at potential changes in key areas, including further detail on tightening of the non-doms scheme and the taxation of private equity carried interest.
We have summarised the most relevant updates for you below.
Personal Taxes in the Budget
Capital Gains Tax (CGT)
There have been discussions about aligning Capital Gains Tax rates with Income Tax rates, which could result in significant changes. With recent reductions in the CGT allowance, further adjustments may be on the table.
If you are planning any major sales or considering the closure of your business, it may be beneficial to act quickly, as any changes could take effect after the Budget. In many cases, contracts exchanged before the announcement may still follow the current rules.
Please see our article concerning Capital Gains Tax for more information.
Gift Holdover Relief
This relief allows for the deferral of Capital Gains Tax when business assets are gifted. If the Government seeks immediate revenue, this relief could be a target. If you are considering gifting business assets or shares to family members, it might be worth completing this before the Budget to ensure you benefit from the current rules.
Inheritance Tax (IHT)
There have been a lot of rumours regarding the reform of Inheritance Tax and while some of the speculation involves complex changes to the system, several areas of Inheritance Tax could easily be targeted including:
- The removal of Agricultural Property Relief (APR) and Business Property Relief (BPR): APR can help reduce IHT on agricultural assets, which has been a key tool for farmers to allow the passing down of land and buildings. BPR provides relief from IHT on certain assets such as shares in unquoted companies.
- Reform or Removal of Potentially Exempt Transfers (PETs): PETs allow gifts (over the normal exempt limits) to be made without triggering immediate IHT and can exempt these gifts entirely if the donor survives seven years. There is speculation that the Government may remove this exemption and so thought should be paid to making any intended significant gifts before the 30th October.
Our private client team can assist on these matters as well as any other IHT or Will related advice.
Pensions
It is possible that the Government may remove or amend pension tax relief for individuals who make higher and/or additional pension contributions and instead introduce a flat rate regardless of the saver’s income. If you are a higher rate taxpayer making personal pension contributions it may be wise to seek financial advice and consider making your contributions before the 30th October.
The standard lifetime allowance was abolished in April 2024, and while it is unlikely this will be reversed, it is always worth being aware of any potential changes.
Other Taxes
We know already that the taxation of non-doms and furnished Holiday Lets (FHL) will change from April 2025, as per the Spring Budget 2024, but there will be additional changes.
Non-doms
Whilst the previous Government proposed in the Spring Budget 2024 that those transitioning from the remittance basis to arising basis in 2025/26 would only be taxable on 50% of their foreign income in that year, the new Government has confirmed it will not now be introducing this provision. However, there will be a “rebasing relief” on foreign assets to limit the capital gains tax exposure for current and past remittance basis users. The date of rebasing will be confirmed at the Budget.
The Government has also confirmed that it intends to introduce the 4 year ‘foreign income and gains’ (FIG) regime, again announced by the previous Government, from the start of the next tax year on the 6th April 2025. Individuals moving to the UK will not pay UK tax on their foreign income and gains for the first 4 years of being UK residence, as long as they were not UK resident in any of the previous 10 tax years. After those first 4 years, individuals will be subject to UK tax on all their income and gains in the same way as an ordinary UK taxpayer.
There are also anticipated changes to the inheritance tax regime with changes to be made from the 6th April 2025 to include:
- A 10-year residence test, after which global assets will be subject to UK inheritance tax
- Grandfathering of excluded property trusts so that everyone who is in scope of UK IHT will have their assets subject to UK IHT.
Interestingly, despite an initial announcement that there would be no consultation on these changes, the Treasury has initiated a representation on the proposed changes to the non-dom regime, which closes on the 5th September. It will be interesting to see the result of any representations made and the final proposals and draft legislation to be announces on the 30th October. Visit our update history page, which is updated regularly to reflect the latest information and developments.
Furnished Holiday Lets (FHL)
The Government has already confirmed that the rule changes for FHL, proposed in the Spring Budget, will come into effect from April 2025.
Key changes include the removal of pension relief, further restrictions on Business Asset Disposal Relief (BADR), and the reduction of full interest relief claims. These adjustments could significantly impact your profits, so it is important to be prepared.
Next Steps and Additional Information
What is reassuring for those impacted by any of the above expected changes is that a Budget date of 30th October should, subject to the publication of draft legislation, allow time to consider any suitable actions to take pre-6th April 2025. For expert advice and support, please contact us at advice@dixcart.com.
