UK Autumn Budget 2024: Big Changes to Taxes and What They Mean for You

MA & CO Accountants Podcast

The UK Autumn Budget 2024 is shaping up to be one of the most talked-about Budgets in recent years. There are major changes coming that could affect everything from pensions to capital gains tax (CGT), inheritance tax (IHT), employer's national insurance contributions (NICs), fuel duty, and even VAT on school fees.

Here, we'll break down what these changes could mean for you, your business, and your family.



1. Changes to Pensions

Pensions are getting a lot of attention in this Budget. There are a few significant changes that may be coming:

  • The 25% tax-free lump sum that retirees can take from their pensions may be reduced from £268,275 to just £100,000.

  • The government may introduce a flat rate of tax relief for pension contributions, which could be 30% for everyone. Currently, higher earners get more tax relief, which helps them save more for retirement.

  • Employer's NICs on pension contributions could be introduced. This means employers may have to pay extra if they contribute to your pension, making it harder for them to offer good pension contributions to workers.



These changes could make it more challenging for people to save for retirement, especially for those who rely on higher pension tax relief. If you want to learn more about how pension changes could affect you, see how MA & CO Accountants help with retirement planning.

2. Increase in Employer's National Insurance Contributions (NICs)

Employer's NICs may also be going up. Here's what to expect:

  • The rate of employer NICs could increase by 1-2%. This increase could bring in about £16 billion for the government each year.

  • The rise could make it harder for businesses to hire new staff, offer pay raises, or provide employee benefits. It may lead to fewer new hires and cuts to salaries or benefits, especially in small businesses.



For a business with an annual wage bill of £5 million, the NICs cost would increase from £564,000 to about £615,500, which is an increase of about 9%.

To understand how these changes might impact your business, read more about tax advisory services from MA & CO Accountants' business tax solutions.

3. Capital Gains Tax (CGT) Reforms

The government is also looking to make changes to capital gains tax (CGT). Here are some possible changes:

  • The CGT rate could be increased to be in line with income tax rates. This means that gains could be taxed at up to 39%, which is much higher than the current rates of 10% or 18%.

  • For high-net-worth individuals, gains on investments or property could be taxed at 45%, depending on their income.

  • The Business Asset Disposal Relief (formerly called Entrepreneurs' Relief) could also be reviewed. Currently, this relief allows business owners to pay a reduced 10% CGT on lifetime gains up to £1 million.


These changes could have a big impact on those looking to sell assets or liquidate investments. You might need to rethink your plans if you are thinking of selling any assets soon. For more information, check out MA & CO Accountants' capital gains tax advisory.

4. Inheritance Tax (IHT) Adjustments

Changes to inheritance tax (IHT) could also be coming:

  • The nil-rate band, which is the amount you can leave behind without paying IHT, could be reduced from £325,000 to £250,000.

  • The IHT rate might go up from 40% to 45%.

  • The current rules that allow pensions to pass to heirs without being subject to IHT might be changed. This could mean that pensions become part of the taxable estate, making it harder to pass them on.

  • The seven-year gifting rule could be extended to ten years. This rule allows gifts given before death to be exempt from IHT if the person survives for seven years.


These changes will make it harder to pass on wealth to your family without paying more in taxes. It will be important to plan ahead and think about your options, such as using gifting allowances effectively.

5. Fuel Duty Increase

Fuel duty could be going up in this Budget:

  • The fuel duty escalator could rise by 7p per liter. This comes after a long period of the duty being frozen.

  • The temporary 5p cut to fuel duty that was introduced during COVID-19 is also set to end by April 2025.


This will lead to higher fuel prices, which could affect the cost of goods and services for everyone. Businesses that rely on transport may face increased costs, which could lead to higher prices for customers.

6. VAT on Private School Fees

The government is introducing VAT on private school fees:

  • Starting in January 2025, private school fees will be subject to 20% VAT. This will make it more expensive for families who send their children to private schools.

  • There is a chance that some exceptions will be made, but for now, families should plan for increased education costs.



How to Prepare for These Changes

With so many changes in the UK Autumn Budget 2024, it's important to plan ahead. Here are some key tips:

  1. Review Your Retirement Plans: If you are saving for retirement, make sure you understand how these changes could affect you. You may want to consider increasing your contributions now before the tax relief rates change.

  2. Plan for Asset Sales: If you are thinking about selling an asset, do it sooner rather than later. Changes to CGT rates could significantly increase your tax bill if you wait too long.

  3. Think About Gifting: If you want to pass on wealth, make sure you understand the rules around gifting and plan to gift assets sooner if possible.

  4. Get Expert Advice: These changes are complicated, and professional advice can help you make the best choices for your financial future.



Summary of Changes

Here is a summary of the key changes coming in the Autumn Budget 2024:

Tax/AreaKey ChangesImpact
PensionsReduction of 25% tax-free lump sum; flat rate tax relief; NICs on employer contributionsMakes it harder to save for retirement
Employer's NICsIncrease by 1-2%; may apply to pension contributionsHigher employment costs, fewer hires
Capital Gains Tax (CGT)Potential increase to 28-39%; review of Business Asset Disposal ReliefHigher taxes on asset sales
Inheritance Tax (IHT)Lower nil-rate band; increased rate to 45%; changes to gifting rulesHarder to pass on wealth
Fuel Duty7p rise; end of COVID-19 temporary cutHigher fuel prices
VAT on School Fees20% VAT on private school feesIncreased education costs

Conclusion

The UK Autumn Budget 2024 brings a lot of changes that could affect people’s financial situations. The main areas affected include pensions, NICs, CGT, IHT, fuel duty, and school fees. It is important to understand these changes and make plans now to minimize their impact.

If you need help preparing for these changes, MA & CO Accountants can assist you with tax planning, retirement planning, and business advisory services. Our expert advisors are ready to help you understand how these changes will affect you and what steps you can take to stay ahead.

Take action today to make sure you are prepared for whatever the Autumn Budget brings. Reach out to our team for personalized advice and support.

Frequently Asked Questions (FAQ)

Q: How will the changes to pensions affect my retirement savings?

A: The reduction of the tax-free lump sum from £268,275 to £100,000 and the potential introduction of a flat tax relief rate may make it harder to save for retirement. Higher earners may no longer get as much benefit from tax relief, which means less incentive to save. Consider increasing your contributions before the changes take effect.

Q: What does the increase in Employer's NICs mean for my business?

A: Employer's NICs could increase by 1-2%, which would raise employment costs. This could lead to fewer new hires and cuts in benefits or pay raises, especially for small businesses. It’s important to plan for these increased costs now.

Q: Will capital gains tax rates go up?

A: Yes, the CGT rate could increase to match income tax rates, potentially up to 39%. This means higher taxes on asset sales, which could impact anyone planning to sell investments or property. It may be wise to consider selling assets sooner rather than later.

Q: How will inheritance tax changes affect passing on wealth to my family?

A: The nil-rate band for IHT could drop from £325,000 to £250,000, and the rate could increase from 40% to 45%. This means more estates will be liable for IHT, making it more challenging to pass on wealth without incurring significant tax. Proper estate planning is crucial to mitigate these impacts.

Q: What should I do to prepare for these changes?

A: You should review your retirement savings, consider selling assets soon, and plan for increased employment costs if you own a business. Consulting with a financial advisor can help you navigate these changes effectively.

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