Autumn Budget 2024: How to Protect your Wealth and your Business

On Wednesday, 30 October 2024, Chancellor Rachel Reeves delivered the first Labour Government Budget in 14 years. The raft of taxation measures announced by Reeves at the dispatch box have some profound implications for both individuals and businesses.

Tax Director Liam Coulter outlines the key changes to Capital Gains Tax, Inheritance Tax, Stamp Duty and National Insurance from the Autumn 2024 Budget and provides hints and tips for individuals and businesses to minimise their tax bill and capitalise on any opportunities to come out of the Chancellor’s red box.

What do you need to know about Capital Gains Tax for individuals?

The Autumn 2024 Budget has significantly raised the Capital Gains Tax (CGT) burden on individuals. The headline figures are as follows:

• The lower rate has increased from 10% to 18%.
• The higher rate has increased from 20% to 24%.

This brings the rates in line with current CGT on residential property, which is unchanged.

Investors, in particular, will feel the effects of these changes, as they now face paying more CGT on any profits from selling assets, including shares.

The rate changes have come into effect immediately after the Budget, cutting options for investors. The heavily reduced CGT tax-free allowance of £3,000 doesn’t leave much room to avoid paying tax on gain.

Steps to Reduce your Capital Gains Tax Bill

It may seem like a small fry, but you should nevertheless use your annual £3,000 CGT allowance.  If you’re building up a big gain, you might be able to realise it gradually, over a period of years.

If there is scope to do so, you should consider selling and moving investments into tax-efficient accounts such as a stocks and shares ISA or Self Invested Personal Pension (SIPP).

If you are married or in a civil partnership, you can transfer the ownership of some investments to your spouse or civil partner without incurring CGT, and potentially use their CGT allowance or lower CGT rate.

You can also use any CGT losses brought forward from earlier years.

Capital Gains Tax for Businesses: Key Changes

In her Autumn 2024 Budget, Chancellor Rachel Reeves also introduced substantial changes in the Capital Gains Tax levied on businesses: 

• Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) will increase from 10% to 14% for disposals made on or after 6 April 2025. The rate will increase again to 18% for disposals made on or after 6 April 2026. The higher rate has increased from 20% to 24%.
• The lifetime limit for Investors’ Relief will be reduced from £10m to £1 m for qualifying disposals made on or after 30 October 2024.  This limit takes into account any prior qualifying gains where the relief was claimed.

As a business owner, you will, therefore, have to factor in the increased CGT rates (mentioned above), as well as the changes to BADR, when considering your exit strategy and sale of the business.

How to Reduce the CGT Bill for your Business

If you are already thinking of selling your business, one option to consider is bringing the sale forward before 5 April 2025 or 5 April 2026 to avail yourself of the lower CGT rates.

Certain Capital Gains Tax reliefs, such as rollover relief and holdover relief, appear to be unaffected, which means that you could potentially defer the gain when gifting to future generations.

Married couples could consider transferring shares to each other to make use of both sets of allowances at the reduced rate of tax.

Inheritance Tax: What are the changes from the Autumn 2024 Budget?

Arguably the most hotly debated form of taxation, Inheritance Tax (IHT) has also seen a raft of changes with the arrival of the first Labour Government Budget:

• Pensions are to be brought into taxable estates
• Agricultural and business reliefs will be halved above £1m
• The threshold freeze is to be extended by two years to 2029-30

So how are these changes likely to impact you?

Pensions

Currently, most UK-registered pension schemes are outside the scope of Inheritance Tax. Therefore, unused pension funds and death benefits from such schemes are not part of an individual’s estate.

From 6 April 2027, if a pension scheme member dies with unused pension funds, the pension scheme administrators will become liable for reporting and paying any IHT due on unused funds and death benefits. The rule applies to both UK-registered pension schemes and those registered overseas. 

In some instances, adding a pension fund to someone’s IHT estate will result in them losing the residence nil rate band (RNRB). This is the tax-free amount of up to £175,000 that can help reduce someone’s IHT liability in respect of residential property they have owned. If someone’s estate for IHT purposes exceeds £2m, the RNRB starts to be reduced, meaning that someone with an estate of £2.35m will have no RNRB available to them.

Agricultural Property Relief and Business Property Relief

Previously, valuable IHT reliefs, including Agricultural Property Relief (APR) and Business Property Relief (BPR) could effectively exempt 100% of assets from a charge to IHT.

Both APR and BPR are now limited to a 100% relief up to the first £1m and then at a flat rate of 50% of anything in excess of this amount.  The £1m is aggregated across both APR and BPR.

Inheritance Tax threshold

The current IHT threshold of £325,000 will be frozen until April 2030. With inflation and the likely increase in property values over the next six years, we expect the number of those who have taxable estates to rise.

How can you Best Mitigate against these Changes to the Inheritance Tax regime?

Five ways to reduce your Inheritance tax liability

1. Consider cashing in your pension earlier.  It may be more beneficial to take a tax free lump sum and make gifts now to start the seven-year Potentially Exempt Transfer (PET) clock running.  This means that the gift could be outside your estate for IHT after seven years.
   
2. Review your will and consider restructuring it to ensure that assets qualifying for APR or BPR on the first death pass directly to the next generation rather than to the surviving spouse, thereby minimising the value held in the latter’s estate.
   
3. Use lifetime gifts. It may be possible for farmers/landowners who can afford to give away their assets to make gifts to the next generation or settle assets into trust before the 6 April 2026 deadline. Currently, when an individual makes a gift to another individual and survives a further seven years, the value of the gift falls outside of their estate for IHT. In addition, where the individual does not survive the gift by seven years but survives it by three years or more, ‘taper relief’ may apply to reduce the IHT payable.
   
4. Consider a life insurance policy. This can be a valuable option to help fund the potential tax bill or tax on a large gift.  Insurers are available who provide individuals with life insurance on a potential IHT liability. This can be expensive depending upon age, but is often significantly cheaper than paying a large IHT bill on death.
   
5. Trusts: the use of trusts in family tax planning should not be overlooked and may be a favoured option over the outright gift in some cases.  The £1m allowance will also apply to trusts; yet care should be taken, as the value of the trust is reassessed every 10 years for IHT purposes.

What about Property Taxation? Changes to Stamp Duty Land Tax explained

As predicted, the Chancellor has also introduced changes to the Stamp Duty Land Tax (SDLT) regime in her first Budget:

• The higher rates for additional dwellings (covering second homes, buy-to-let residential properties, and businesses purchasing residential property) will increase from 3% to 5% from 31 October 2024.
• The single rate of SDLT that is charged on the purchase by businesses of dwellings costing more than £500,000 will also be increased by 2%, from 15% to 17%.

The government’s intention is to cool certain segments of the property market by increasing the financial commitment required for second-home and investment property purchases. 

For buyers planning to invest in property for the long term, these SDLT changes may influence purchase decisions, while first-time buyers will need to budget for potential SDLT liabilities that were previously exempt.

Those who exchanged contracts prior to 31 October 2024 are not affected by this rate increase.

What can you do to pay less Stamp Duty Land Tax?

• When planning to purchase property, make sure that you understand your buyer status, as this will help you determine the applicable SDLT rate.

• Where possible, you should try to accelerate your pending transactions to complete on or before the March 2025 deadline to benefit from the current SDLT thresholds.

• Are you purchasing within the new thresholds for first-time buyer relief?
  Knowing the threshold limits is essential to avoid unexpected SDLT expenses.

Employers will Have to Pay More National Insurance (NI)

The changes to National Insurance contributions in the Autumn 2024 Budget have some significant implications for employers:

• Class 1 employers’ National Insurance contributions (NICs) will be increased from 13.8% to 15% from 6 April 2025.
• The employment allowance was increased from £5,000 to £10,500.

So what does this mean for employers?

NICs are paid by employees, employers and the self-employed on earnings. Currently, employers pay NI at 13.8% on earnings over £9,100. The changes introduced with the Autumn 2024 Budget will see the headline rate of 13.8% increase to 15% and employers will start to pay NICs on earnings over £5,000.

The change in the minimum threshold will cost employers £615 for employees earning over £9,100 per annum. The 1.2% increase will affect all employers with employees earning over £9,100.

In an effort to soften the impact on employers, the employment allowance increase means 865,000 businesses will not pay any NI at all next year, with another one million paying the same or less as they did previously.

How can Employers Reduce the Impact of the National Insurance Changes?

Employees making use of salary sacrifice arrangements, such as cycle to work, childcare vouchers, pension payments and ultra-low emission cars, will continue to benefit themselves from income tax and NI savings, and their companies will benefit more than previously. As a result, these arrangements have become more attractive for companies who may wish to promote the benefits to their workforces.

Where possible, companies could consider expediting the payment of income subject to NI (such as salary) before the higher rate takes effect.

Those employers with Family investment Companies (FICs) or Personal Investment Companies (PICs) may wish to reconsider how much is extracted from the company using salary versus dividends and the use of salary sacrifice arrangements as above.

Need Help Streamlining your Tax Affairs? Contact our Expert Tax Team

Are you affected by the taxation changes introduced in the Autumn Budget and in need of professional advice? At Wilson Nesbitt, you will receive expert advice and support from our friendly, professional and highly experienced team of tax specialists led by Tax Director Liam Coulter and Partner Gilbert Nesbitt.

If you need our help, enquire today so we can protect your interests.
Call us on 0800 840 9293 or make an online enquiry.