Autumn Budget 24
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Autumn Budget 2024
There was plenty of speculation and rumour ahead of yesterday’s budget but all that is over now, and we know what we are dealing with. Not as bad as it could have been, would be our summary, but that may depend on whether you have your employers or investment hat on! This is just a quick summary of the main changes, mainly focused on taxation issues.
Income tax
The personal allowance will remain at £12,570, and this is frozen until 2028.
The rates for the UK (excluding Scotland) will remain at:- Basic tax rate 20% on first £37,700 over the personal allowance.
- Higher rate 40% on earnings over £37,700 plus personal allowance.
- Additional rate 45% on earnings over £125,140.
Income tax for Scotland will be announced in the Scottish Government’s budget in December.
National Insurance
Employee National Insurance
From 6 April 2025, employee National Insurance will remain at:- Class 1 National Insurance contributions employees will pay 8% on their earnings between the primary threshold and the upper earnings limit; between £12,570 and £50,270.
- Class 1 National Insurance contributions employees pay 2%, on their earnings above the National Insurance contributions upper earnings limit.
Employer National Insurance (ouch)
Class 1A and 1B employer National Insurance contributions from 6 April 2025 will be increased from 13.8% to 15.0% on earnings over £5,000. The Secondary Threshold, from which employer contributions start to be paid, will reduce from £9,100 a year to £5,000 a year. The Employment Allowance, which allows employers who pay less than £100,000 in National Insurance contributions to reduce their National Insurance bill, will increase from £5,000 to £10,500 from 6 April 2025.
Pensions
Pension death benefits
There is normally no inheritance tax on death benefits if the choice of beneficiary is the scheme administrator’s, using their powers of discretion. From 6 April 2027, inherited pension death benefits will be subject to inheritance tax regardless of who chooses the beneficiaries. The Government will consult on the processes needed to implement these changes.
State pensions
The Government is keeping the triple lock. The Basic State Pension, new State Pension and Pension Credit standard minimum guarantee will be uprated in April 2025 by 4.1%, in line with earnings growth in September 2024.
- The new State Pension will rise by £474.85 to £12,016.75 a year.
- The Basic State pension will rise by £361.40 to £9,175.40 a year.
Savings
ISA
Subscription limits remain the same from 6 April 2025 so are:
- Adult ISA annual subscription - £20,000
- Child Trust fund - £9,000
- Junior ISA - £9,000
- Lifetime ISA - £4,000
British ISA
This has been scrapped
Inheritance tax
The nil rate band (£325,000) and the residential nil rate band (£175,000) will remain frozen until April 2030.
From 6 April 2026, an individual will be able to leave combined business and agricultural assets to their loved ones of £1million without an Inheritance tax liability, with any excess being taxed at 20%. From 6 April 2025, the domicile-based system for inheritance tax will be replaced by a residency-based system.
Trusts
Under current rules, if the settlor is a beneficiary under a trust which was executed whilst non-domiciled returns to the UK, the trust is protected. From April 2025, that protection will no longer be available and if the individual is a settlor and resident in the UK for 10 years the trust will be caught.
Capital Gains Tax
From April 2025 the lower rate will be increased from 10% to 18%, with the higher rate being increased from 20% to 24%. This brings the rates in line with the rates for residential property.
The annual allowance remains at £3,000Pensions and IHT
The biggest change is probably the planned inclusion of pension benefits as part of the estate for Inheritance Tax (IHT) purposes. This may bring several of you into the position of your estate now being liable to IHT. There have been consultation documents issued that will be used to clarify the application of this change, which will come into effect in 2027, and until that detail is ironed out it will be difficult to look at potential planning solutions. However, it may be time to start to understand how IHT works and the impact it may now have on your estate after you are gone.
CGT
The rise in the CGT rates could have been worse! But it should serve to focus the mind on making sure you make use of your annual allowance; we have seen the rate of CGT payable increase and the allowances reduce in successive budgets so making use of the allowance each year should be part of prudent investment planning.
In the best tradition of foot notes and disclaimers “if you have been affected by any of the issues covered in this summary please just get in touch and we will be happy to help”
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Hi Mike
I think it will be the case for many, drawing pension benefits may now be a consideration, and some additional estate planning may be needed.
Definitely a bit early to start anything too drastic, there is still a lot of detail to be finalised before we will know how the changes will be implemented and so how best to set out any new plans. -
Thanks Nik, very helpful.
It will certainly have me thinking of spending more and leaving less. I met a couple a few years ago who told me their way of thinking was that the holiday they were taking was half price - because if they didn't take it, half the cost of it would go in IHT.
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Thanks Nik, very helpful.
It will certainly have me thinking of spending more and leaving less. I met a couple a few years ago who told me their way of thinking was that the holiday they were taking was half price - because if they didn't take it, half the cost of it would go in IHT.
My mum and dad were lucky enough to retire young and have happily told me for many a year that their globe trotting ever since has been to help manage any IHT liability that my sister and I may be left with!
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@Nik-Burrows that my plan and will adopt that phrase as I quite like it
I'd already told my kids that they will inherit whatever I fail to spend and that I intend to spend it all, but probably won't. -
Pensions and IHT, does this remain free foe IHT for spouses? as per other assets?
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This hasn't changed, Mark. Pensions will be added to assets subject to IHT. However the 'spousal exemption' means any assets left to ones married spouse or civil partner(legal) is still exempt.
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There are existing rules(pre Oct 24 budget) around pensions passing to spouses before 75 vs after 75 in regards income tax on any withdrawals. This has not changed.
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Pensions and IHT, does this remain free foe IHT for spouses? as per other assets?
Hi Mark,
As Adam has said, based in the current understanding pension assets will now pass into the estate so will be treated in the same way as other assets and so would still pass IHT free between spouses.
A couple of wrinkles though. It looks like pension assets could be subject to "double taxation" if you die after age 75. They are subject to income tax in the hands of the beneficiary at the moment and the detail about how this will be treated under the new rules is yet to be clarified.
There are consultation papers in the system at the moment to look at how the broad policy of "Pensions form part of the estate" will actually play out in practice, so we can expect some detail in the next few months.
There is a reason that the implementation time line was set at 2027, there is still a bit to work through
Nik
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Just thinking, which is usually dangerous, but all the focus of commentary on the IHT changes concerning pensions is on DC schemes.
I wonder whether survivor pensions provided by DB pensions would be caught by the IHT change? I guess, by definition, the pension isn't for the benefit of the individual who accumulated the pension, and is therefore 'unused'?
If not, I wonder whether there will be a new breed of annuities which are wholly/mainly for the benefit of spouses/children? -
Hi Dangermouse,
I think this is why Nik suggested we wait to see the guidance. It is not my area of expertise, however an Annuity is not a pension. It is a converted pension into a legal contract between 'you' and the issuer. I would speculate that any post death benefit would amount to an asset of the estate. Until a discussion paper/guidance notes is issued we are just guessing.
Regards
Adam
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Just thinking, which is usually dangerous, but all the focus of commentary on the IHT changes concerning pensions is on DC schemes.
I wonder whether survivor pensions provided by DB pensions would be caught by the IHT change? I guess, by definition, the pension isn't for the benefit of the individual who accumulated the pension, and is therefore 'unused'?
If not, I wonder whether there will be a new breed of annuities which are wholly/mainly for the benefit of spouses/children?The current indication is that beneficiary pensions within a DB scheme will be classed as outside the estate.
Given that they are paid as income and taxed in the hands of the recipient as income there is already tax claimed on this benefit.
It is also likely that an annuity with ongoing beneficiary payments after death would also be treated as outside the estate.
The main "target" is unused pension pots that at the moment pass as a tax free lump of cash on death before 75.
Cheers
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