As the 2024 Autumn Budget approached many of you felt apprehensive about what changes we’d see and the impact.
Speculation was rife across the business, investment, and retirement landscapes, with changes anticipated to Capital Gains Tax (CGT), pension allowances, and Entrepreneurs’ Relief.
However, the Budget sidestepped these feared measures, leaving many relieved yet curious about the future.
Let’s take a closer look at each of these measures, what the concerns were, and what the Budget ultimately decided.
One of the most talked-about concerns was the possibility of raising Capital Gains Tax (CGT) to align with income tax rates.
The rationale behind this fear was simple: bringing CGT closer to income tax rates, potentially as high as 39%, could significantly boost tax revenues by closing what some consider a gap in the tax system.
Investors, particularly those with property and stocks, were understandably anxious about this potential change, as it would have cut deeper into profits from asset sales and potentially stifled investment activity.
Despite the speculation, the Budget increased the CGT paid by basic rate taxpayers from 10% to 18% and for higher rate taxpayers from 20% to 24%—still lower than income tax rates.
The decision not to align CGT with income tax preserved a favourable environment for investors, reducing the immediate tax burden on those who might otherwise have considered selling assets to avoid higher tax liabilities.
The decision reassures the investment community that capital gains remain a vital tool for long-term wealth growth and business reinvestment.
The second major concern was the possible reduction of the 25% tax-free lump sum allowance on pensions or the introduction of inheritance tax on pensions.
Pensions represent a significant savings vehicle for millions of UK workers, and adjustments to tax-free withdrawal limits would have had a broad impact, particularly for those nearing retirement.
The good news for retirees is that the 25% tax-free allowance remains intact, preserving flexibility, and enabling retirees to plan for larger expenses and estate planning.
However, a new inheritance tax will be applied to pensions from 2027, requiring a rethink of your income glide path in WealthMap®.
Entrepreneurs’ Relief was another point of anxiety among business owners and start-ups.
This relief allows entrepreneurs to benefit from a reduced 10% CGT rate on the sale of qualifying businesses, with a lifetime allowance of £1 million.
Critics have argued this relief disproportionately benefits wealthier business owners, while supporters see it as an essential incentive for entrepreneurship in the UK, especially during periods of economic recovery.
The Budget has maintained Entrepreneurs’ Relief, preserving a lower tax rate for those selling their businesses.
By leaving this relief in place, the government recognises the economic contributions of small businesses and the role that lower CGT rates play in encouraging innovation and risk-taking.
Although there are no changes for now,I think the government will revisit this in April 2025.
While the Autumn Budget may have quelled some immediate concerns, staying informed and prepared remains essential for anyone aiming to make the most of their investments, retirement savings, or entrepreneurial ventures in an evolving financial landscape.
So where do these budget outcomes leave you, and how can Emma and I continue adding significant value to your WealthMap planning?
Over the next four weeks, we’ll be reviewing the new budget legislation line by line, looking at how the changes will affect your plans and thinking through approaches we can take to minimise any negative impacts.
Acting quickly will put you ahead of the curve—you will remain on track, and we will fulfil the objectives we've outlined in your planning sessions.
That's what we intend to do and that's where we hope to demonstrate that our ongoing Momentum service is excellent value for money.
As the British Army can attest, even the most well-crafted plans are tested by changing circumstances and financial plans are no different.
While no financial plan can fully anticipate each new budget change or economic twist, our approach will ensure we can pivot with you as smoothly as possible.
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