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  3. Autumn Budget 24

Autumn Budget 24

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  • N Offline
    N Offline
    Nik Burrows
    Global Moderator
    wrote on last edited by global_admin
    #1

    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 £3,000

    Pensions 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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    • M Offline
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      mikeiow
      wrote on last edited by
      #2

      Thanks Nik 👍
      It certainly tweaks how we might approach things.....
      I was kind of avoiding touching my main DC pot (as you know)....might be in touch over coming months 🤷‍♂️
      Nothing too urgent, I would say 🤞

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      • N Offline
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        Nik Burrows
        Global Moderator
        wrote on last edited by
        #3

        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.

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        • C Offline
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          Car Bon
          wrote on last edited by
          #4

          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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          • C Car Bon

            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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            Nik Burrows
            Global Moderator
            wrote on last edited by
            #5

            @Car-Bon

            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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              Car Bon
              wrote on last edited by
              #6

              @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.

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              • 2 Offline
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                2BToo
                wrote on last edited by 2BToo
                #7

                Given the way that markets have gone in the last couple of days I doubt anyone will have any concerns about the raise in GCT .... 😢

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                • M Offline
                  M Offline
                  markiii
                  wrote on last edited by
                  #8

                  @Nik-Burrows

                  Pensions and IHT, does this remain free foe IHT for spouses? as per other assets?

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                    Adam Kay
                    Global Moderator
                    wrote on last edited by
                    #9

                    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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                      Adam Kay
                      Global Moderator
                      wrote on last edited by
                      #10

                      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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                      • M markiii

                        @Nik-Burrows

                        Pensions and IHT, does this remain free foe IHT for spouses? as per other assets?

                        N Offline
                        N Offline
                        Nik Burrows
                        Global Moderator
                        wrote on last edited by
                        #11

                        @markiii

                        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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                        • D Offline
                          D Offline
                          Dangermouse
                          wrote on last edited by
                          #12

                          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?

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                            A Offline
                            Adam Kay
                            Global Moderator
                            wrote on last edited by
                            #13

                            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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                            • D Dangermouse

                              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?

                              N Offline
                              N Offline
                              Nik Burrows
                              Global Moderator
                              wrote on last edited by
                              #14

                              @Dangermouse

                              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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