Autumn Budget 2024: What to expect
Prime Minister Keir Starmer recently made headlines with his statement, “I will be honest with you, there is a budget coming in October, and it’s going to be painful.” This has led many businesses to hit pause on decisions and hold back on budgets, unsure of what’s coming next.
What we expect to stay the same
One positive note is that Labour’s manifesto has promised not to raise Corporation Tax, Income Tax, National Insurance, or VAT (with the exception of changes related to private school fees). This should provide a bit of stability for taxpayers in these areas.
What we expect to change
The government will need to find ways to generate revenue, which could mean significant changes in other areas:
Capital Gains Tax (CGT)
We may see CGT reliefs and allowances targeted, with rates potentially aligning with Income Tax rates, meaning higher rate taxpayers could face CGT at 40% or even 45%. Alternatively, there’s also talk of raising the overall CGT rate to around 30%, with a 20% rate for business assets, replacing the current 10% under Business Asset Disposal Relief (BADR). This has prompted some clients to rush through business sales. If you're thinking of selling your business in the next year, it is worth having a conversation with us as soon as possible.
Inheritance Tax (IHT)
Potential changes could include the removal of the residence nil-rate band, although this might be contentious. We might also see a review of reliefs like Business Property Relief (BPR) and Agricultural Property Relief (APR), and possibly the inclusion of pension pots within the estate’s value for IHT purposes.
Pensions
There’s concern that higher rate tax relief on pension contributions could be restricted to the basic rate, similar to the previous changes seen with mortgage relief for investment properties. We might also see changes to lifetime allowance rules or caps, or (as mentioned above) potentially bringing pension pots into the taxable estate for IHT purposes.
Other considerations
While the focus is often on business-related changes, it’s important to stay informed about broader issues that could impact you personally.
Winter fuel payments: Keir Starmer has defended the government’s decision to cut the winter fuel allowance for 10 million pensioners, limiting the benefit to only those receiving pension credit. Despite criticism from Labour MPs and organisations like Age UK, Starmer emphasised that this difficult choice is necessary to address a £22 billion black hole in the economy.
He acknowledged that it’s a tough decision, but stressed that it’s vital to stabilise the economy and lay the groundwork for a better future for all, including pensioners.
Council tax changes: Labour is considering changes to council tax, including potentially removing the single-person discount, which currently saves eligible individuals 25% on their bills.
The existing council tax system, based on outdated property valuations from 1991, has been criticised as “absurd” and “poorly designed.” There’s speculation that Labour may replace the banding system with a 0.5% annual tax on property value, which could significantly impact homeowners, especially in areas like London with high property prices.
Your action plan
Given these potential changes, it’s a good idea to discuss strategies with your Lead Adviser (or accountant if you're not a Wow client), especially if you’re considering selling assets or making significant pension contributions. If you’re in a position to fund your pension under the current rules, now might be the right time to do so to mitigate the risks of potential tax rule changes.
While we try to get through these uncertain times, the best thing you can do is stay informed and be prepared. If you’d like to chat more about anything mentioned, get in touch.
