Autumn Statement – What does it mean for your financial plans?

In one of the lengthiest budget addresses in recent memory, Chancellor Rachel Reeves delivered the first Labour Budget in nearly 15 years on October 30, 2024. Below is a summary of key points relevant to the financial planning sector.

Details on the tax rates and allowances for the 2025/26 tax year, alongside a comparison to 2024/25, are available at: www.gov.uk/government/publications/autumn-budget-2024-overview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-allowances.

Non-Domicile Tax Changes

From April 6, 2025, the non-domicile tax regime will be eliminated and replaced with a residency-based system. The government will:

• Implement a new 4-year foreign income and gains system for new arrivals who haven’t been UK residents in the last 10 years.
• Introduce a Temporary Repatriation Facility, allowing individuals previously taxed on the remittance basis to remit pre-April 6, 2025 foreign income and gains.
• Reform Overseas Workday Relief.
• Transition the inheritance tax system from a domicile-based to a residence-based framework.

VAT on Private School Fees

Beginning January 2025, private school fees across the UK will be subject to a 20% VAT, with charitable rates relief on business rates for private schools in England to be removed.

Income Tax and National Insurance (NI)

Income tax bands and personal NI thresholds will remain frozen until April 2028, with adjustments thereafter aligned to inflation.

Capital Gains Tax (CGT) Updates

• Investors’ Relief: The lifetime limit for Investors’ Relief, which lowers CGT on disposals of unlisted trading company shares, will drop from £10 million to £1 million for qualifying disposals after October 30, 2024.
• CGT Rates: Rates for assets other than residential property and carried interest will rise to 18% and 24%, respectively, from October 30, 2024. For trustees and personal representatives, CGT will increase from 20% to 24%.
• Business Asset Disposal Relief and Investors’ Relief: CGT will rise to 14% on April 6, 2025, and to 18% from April 6, 2026.
• Carried Interest: Effective April 2025, carried interest will incur a 32% CGT rate, shifting to an income tax regime in April 2026.

Inheritance Tax (IHT) Adjustments

• IHT Threshold Freeze: Existing IHT thresholds, including the £325,000 nil-rate band and the £175,000 residence nil-rate band, will remain fixed until April 2030.
• Inherited Pensions: From April 6, 2027, unused pension funds will be treated as part of a deceased person’s estate for IHT purposes, affecting both DC and DB schemes in the UK and QNUPS.

Agricultural and Business Relief

Starting April 6, 2025, agricultural relief will cover land managed under government environmental agreements. From April 2026, agricultural and business relief will apply at a 100% rate on the first £1 million in combined assets and 50% thereafter.

National Insurance

From April 2025, employer NI will increase to 15%, with the secondary threshold reducing to £5,000. The Employment Allowance for small businesses will rise to £10,500.

Pension Reforms

• QROPS: As of October 30, 2024, transfers to QROPS in the EEA and Gibraltar will no longer be exempt from the Overseas Transfer Charge. Additional conditions will apply to OPS and ROPS in the EEA from April 2025, with all scheme administrators required to be UK residents by April 2026.

Employee Ownership Trusts and Employee Benefit Trusts

Targeted reforms will be introduced to focus reliefs on supporting employee ownership and preventing misuse for tax advantages.

Stamp Duty Land Tax (SDLT)

Higher SDLT rates for second properties and corporate purchases will increase from 3% to 5% above the standard residential SDLT rate. The SDLT rate for companies purchasing properties over £500,000 will increase from 15% to 17%, effective October 31, 2024.

National Minimum Wage

The National Living Wage will rise to £12.21 per hour, with the minimum wage for 18-20 year-olds increasing to £10.00 per hour from April 2025.

State Benefits and Pensions

State Pensions will increase by 4.1% in April 2025, raising the full new State Pension to £230.25 per week and the basic State Pension to £176.45. The Pension Credit Standard Minimum Guarantee will also rise by 4.1%.

Furnished Holiday Lettings (FHL)

The FHL tax regime will be discontinued from April 2025, aligning the tax treatment of holiday lets with standard residential properties in terms of income and capital gains.

Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom.  Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand. All rates are correct as of 16 October 2024.