REACTION TO THE AUTUMN BUDGET 2024

SPF

Chancellor of the Exchequer, Rachel Reeves, delivered the Labour government’s first Budget on 30 October with a promise to “restore economic stability” and “invest, invest, invest” to promote growth. In her statement, she outlined a number of new tax and spending measures that she said would create “an economy that is growing, creating wealth and opportunity for all.” In total, the Budget will see taxes rise by £40bn.

Economic forecasts

The Chancellor stressed that every Budget she delivers “will be focused on our mission to grow the economy” and outlined seven pillars that will form the government’s growth policy priorities. Key among these is restoring economic stability and increasing investment, while other areas include boosting regional growth, improving skills across the workforce, creating an industrial strategy, driving innovation and transitioning to Net Zero.

Ms Reeves then unveiled the Office for Budget Responsibility’s (OBR’s) latest economic projections, which suggest the economy will expand slightly faster than previously expected both this year and next, before easing off from 2026 onwards. The new forecast predicts the economy will grow by 1.1% in 2024 and 2.0% next year, before falling back to 1.6% by the end of this Parliament. Overall, the OBR noted that, although the policies in the Budget will ‘temporarily boost’ the economy, the overall level of output will be ‘broadly unchanged’ over the five-year forecast period. Inflation is predicted to average 2.5% this year and 2.6% in 2025.

Full details of the budget can be found here. However below we have picked some of the budget announcements pertinent to our services.

  • The lower and higher main rates of Capital Gains Tax (CGT) will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced to £1m for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief.
  • The government intends to reform Agricultural Property Relief and Business Property Relief from 6 April 2026. In addition to existing nil-rate bands and exemptions, the current 100% rates of relief will continue for the first £1m of combined agricultural and business property. Thereafter, the rate of relief will be 50%, including for quoted shares which are ‘not listed’ on the markets of recognised stock exchanges, such as AIM. From 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies.

‘Rachel Reeves long-awaited budget provided expected increases for Capital Gains Tax (CGT) on shares from 10% and 20% to 18% and 24% to match the CGT on residential property plus private pension will be subject to inheritance tax (IHT) from 2027. These changes will affect most of our clients, and relevant changes to planning strategies will need to be considered in detail. However, the biggest surprise occurred in relation to agricultural property relief and business property relief which will be “reformed”. From April 2026, the first £1m of combined business and agricultural assets will not incur inheritance tax but after that it will apply at an effective rate of 20%. Advice should be sort by clients affected in this area and alternative options considered.’

  • Inheritance Tax (IHT) nil-rate bands will stay at current levels until 5 April 2030 (previously 2028). The nil-rate band remains at £325,000, residence nil-rate band at £175,000, and the residence nil-rate band taper starts at £2m. Unused pension funds and death benefits payable from a pension will be subject to IHT from 6 April 2027.
  • The concept of domicile status is to be removed from the tax system and replaced with a residence-based regime from 6 April 2025. This includes ending the use of offshore trusts to shelter assets from IHT and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime. Individuals who opt in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.
  • In England, higher rates of Stamp Duty Land Tax (SDLT) which apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property, increase from 3% to 5% above the standard residential rates, effective 31 October 2024. The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by two percentage points, from 15% to 17%.

‘Far-reaching changes to Inheritance Tax, impacting pensions, businesses, agricultural land, the Alternative Investment Market and non-UK domiciled individuals. With nil rate band and residence nil rate band allowances also being frozen until 2030, thus dragging more estates within scope of Inheritance Tax. Individuals and businesses will be well advised to take steps to minimise the impact of these changes at the earliest possible opportunity, with the potential to pass on family businesses and landed estates prior to the new legislation coming into force, and an ability explore life insurance solutions to protect new or increased tax exposures.’

  • In England, higher rates of Stamp Duty Land Tax (SDLT) which apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property, increase from 3% to 5% above the standard residential rates, effective 31 October 2024. The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by two percentage points, from 15% to 17%.

'Raising the stamp duty surcharge for landlords from tomorrow results in an additional entry cost that investors will have to absorb into their business models. These days we do not see so many investors looking to make a quick profit by buying a property for say £250,000, spending £50,000 doing it up and selling it on at £400,000. Most people are in it for the long term and continue to want to hold property for the long term – an additional entry cost is irritating, but will have to be factored in, although it might put off new entrants to the market. Those already in it, with established models, will continue to invest as it is a market they understand and know. The decision to keep capital gains tax at the same levels for property sales is welcome, particularly after so much speculation of a significant increase in rates and will hopefully stave off any panic selling. We were not expecting to see Help to Buy make a comeback but would have thought the Government might have come up with something to stimulate the housing market and assist first-time buyers so perhaps this was a missed opportunity.'

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