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Navigating the Autumn Budget 2024

As the new Chancellor, Rachel Reeves, prepares to deliver the first budget of the new Labour government on Wednesday 30 October, there are significant tax-related changes afoot which are likely to affect pensions, capital gains tax, and inheritance tax. Below we have outlined the key areas to be aware of so that you can consider pre-emptive actions to safeguard your financial interests.

Pensions: Maximise your contributions

If you are a higher rate taxpayer making personal pension contributions, acting before the budget announcement could be advantageous. There is widespread speculation that higher rate tax relief on pension contributions may be restricted to the basic rate. To ensure you secure the current level of relief, consider making your contributions sooner rather than later.

Other potential changes could include taxing a portion of the tax-free lump sum on pensions and altering the inheritance tax advantages of pension pots.

Capital Gains Tax: Time your transactions

Anticipations are high that the Capital Gains Tax (CGT) rate will increase, potentially aligning with income tax rates. Additionally, the valuable business asset disposal relief, which currently allows eligible gains up to £1 million to be taxed at 10%, may be at risk of removal.

Here are some steps to consider:

  • Business Sales. If you are in the process of selling your business, aim to conclude the transaction before 30th October to lock in the current reliefs. If selling to a third party, it may be challenging to complete by the budget date, but it would be wise to explore your options and initiate conversations.
  • Family Reconstructions and Buyouts. Accelerate discussions regarding family reconstructions, management buyouts, or employee ownership trusts.
  • Loss Realisation. If you hold assets that are likely to incur a loss upon disposal, consider crystallising these losses for potential future tax benefits.
  • Gifting Assets. Evaluate the benefits of gifting assets under the current holdover relief rules in case of any future restrictions.
  • Death Uplift. Consider the implications of potential changes to the death uplift of assets to market value and take action during your lifetime if necessary.

Inheritance Tax: Preserve your estate

The budget may also bring changes to inheritance tax reliefs, particularly Business Property Relief (BPR) and Agricultural Property Relief (APR). With the possibility of these reliefs being reduced or removed, consider earlier gifting strategies to mitigate concerns over these valuable inheritance tax reliefs. Always factor in non-tax considerations when planning your estate.

Other important announcements

VAT and business rates on private schools. The government has released a technical note detailing the design, scope, and anticipated effects of introducing a 20% VAT on private school fees throughout the UK. The note also highlights the elimination of business rates charitable relief for private schools in England.

Abolishing the tax regime for non-UK domiciled individuals. The government has published a policy paper setting out its commitment to introducing significant reforms to the non-dom status from 6 April 2025. The detailed rules will be revealed as part of the Budget.

Abolishing the Furnished Holiday Lettings tax regime. The government has published a policy paper setting out its commitment to abolish the Furnished Holiday Lettings tax regime from 6 April 2025. This will remove the tax advantages that landlords offering short-term holiday lets have over those providing standard residential properties.

How can we help?

Given the anticipated changes, having an urgent and thorough conversation with your professional advisor is highly recommended. Here at Simmons Gainsford, we can support you every step of the way and will be happy to discuss your options.

Please contact us today to ensure you are prepared for the upcoming changes.