Chancellor Rachel Reeves has delivered her first Budget.  Eastmills will now summarise the key points for investments and pensions as we see them below:

The Chancellor has unfortunately increased taxes by 40bn which unfortunately is a record we did not want to see. She has also increased borrowing to £127bn for the 2024/2025 tax year. 

There have been changes to fuel duty and also an uplift to the minimum wage alongside other changes that could have an effect on you

Capital Gains Tax
Capital Gains Tax (CGT) has been increased immediately to
18% for basic rate tax payers
and
24% for higher or additional rate tax payers. 

Thankfully CGT on residential property remains unchanged.  Overall combine this with the current £3000 annual exemption and dividend allowance pensions and ISA’s should be considered where possible

Stamp Duty Land Tax
The Stamp Duty Land Tax has been increased for second homes from 3% to 5% with effect from 31 October 2024.
Inheritance Tax

The Inheritance Tax (IHT) threshold of £325k and an extra £175k residence nil rate band (if left to a direct descendant or qualifying other) freezes have been extended to 2030, naturally meaning that more estates will be drawn into the IHT regime.

The first £1m of combined Business and Agricultural assets will be IHT free with values in excess of this only benefitting from 50% relief.   Alongside increases to the Business Asset Disposal Relief on disposals to 14% in April 2025 and again to 18% the following year, unfortunately means many farmers or landowners and of course businesses, may find themselves subject to Inheritance tax.  As was always the case, these assets should be considered together with other ways to plan for tax effective intergenerational wealth transfer where the investor wishes to retain control over and access to the assets being planned with.

Pensions
Pensions had two changes
1. Thee inclusion of pension death benefits in inheritance tax calculations and charges, from April 2027. (subject to consultation) This will not impact those receiving an income from a defined benefit pension scheme, or those that receive ongoing annuity payments from a single life annuity (guarantee periods and value protection may have Inheritance tax consequences dependant on the size of the estate).  It will, generally impact all other pension death benefits, including death in service payments from pension schemes. The scheme will pay the charge before allocating or paying the residual and the usual exemptions if left to a spouse will apply.

The second pension change comes into immediate effect and only relates to transfer of pension funds to the EEA, where you remain UK resident. The change means that this will be significantly less favourable but in line with transfers to other parts of the world.

Income Tax and National Insurance
The Chancellor reaffirmed Labour’s manifesto promise that ‘working people’ would not pay higher income tax or National Insurance (NI), they did confirm that the current freeze on thresholds will end in April 2028, but until then more people will continue to be pulled into paying increased tax.

The Government did, however, aim their biggest tax increase at employers, increasing employer NI contributions from 13.8% to 15%.  This, alongside a drop in the threshold at which employers start to pay NI from £9,100 to £5,000. Overall this is expected to raise the largest portion at £25bn.

Non-Dom status
The Government’s decisions to abolish the ‘non-dom’ status and end excluded property trusts in today’s Budget could have an impact on the number of UK high net worth individuals settling long term in the UK, which could have a knock-on impact on the UK’s high end property market. This may require specialist advice in relation to those affected.

For Business Owners, consideration should be given to taking dividends rather than salary, and how to best extract funds from their business.  The scope for savings from employing the spouse/partner has been reduced as the secondary threshold has been dramatically lowered. Existing arrangements should be reviewed in light of this change.  As always advice will be essential.

Eastmills will of course be happy to talk you through this please feel free to get in contact on any of our details from the about us page