What the Autumn Budget means for financial planners

This Budget announcement has been one of the most eagerly awaited in recent memory, and we now have the government's fiscal plan outline.

As expected, the debut Budget under the new Labour government was not a quiet affair – it felt rather like three Budgets combined into one.

Several of the many rumoured changes ahead of the event thankfully did not come to pass, like changes to pensions tax-free cash. But there were some major changes which are likely to impact financial planning going forward.

Here, we present an overview of the most significant announcements for advisers in the 2024 Autumn Budget.

What the Autumn Budget means for financial planners

1. Capital gains tax rates rise

As anticipated, capital gains tax (CGT) is set to increase. From 30th October, the lower rate of CGT will rise from 10% to 18%, and the higher rate will increase from 20% to 24%. This change will effectively eliminate the CGT surcharge on residential property, which will now remain at 18% and 24%.

There is no change to the CGT annual exemption of £3,000 for individuals and £1,500 for trusts.

Additionally, the rate of Business Asset Disposal Relief (BADR), and Investors’ Relief (IR) will increase gradually to 14% from 6 April 2025, and will match the main lower rate of 18% from 6 April 2026. This will be seen as a blow to entrepreneurs, who often sacrifice their earnings knowing they will have a reduced tax rate when it comes to selling their businesses.

2. Inheritance tax (IHT) on pensions

Pension pots will be included in estate valuations starting April 2027. This reform has considerable implications. Most notably, it will bring many more people into the inheritance tax (IHT) bracket.

Consequently, individuals might choose to withdraw from pension pots faster to make gifts if affected by IHT limits. Others may find annuities more attractive for retirement income as drawdown death benefits diminish.

Overall, these IHT changes call for earlier planning and careful consideration of gifting allowances, especially gifts out of ‘excess income’. Wealthy individuals can make unlimited IHT-free gifts if given regularly and without impacting their standard of living, but meticulous record-keeping is essential.

3. IHT thresholds freeze until 2030

In the last hit for IHT, the current nil rate band of £325,000 and residence nil rate band of £175,000 have been frozen for a further two years. Initially set to see inflation-level rises from 2028, this freeze has been extended until 2030.

4. Income tax and NI thresholds for individuals will remain frozen

Tax thresholds for individual will remain frozen, as they did under the previous Conservative government. But the chill will not persist for as long as feared as the Chancellor confirmed a return to inflationary rises from 2028. Of course, things could change between now and then.

5. Business and agricultural property relief cut in half

Starting April 2026, the government will reform agricultural and business property relief. Alongside existing nil-rate bands and exemptions, the 100% relief rate will remain for the first £1 million of combined agricultural and business assets, to safeguard family farms and businesses. Beyond this threshold, relief will drop to 50%.

Additionally, the government will reduce business property relief to 50% for shares designated as "not listed" on recognised stock exchange markets like the Alternative Investment Market (AIM). Many investors had feared that business property relief would be completely abolished, making this news a pleasant surprise.

6. National insurance rise (NI) for employers

There was no change to employee or self-employed national insurance contributions, as widely anticipated, but private employers will pay more NI with the current 13.8% rising to 15.0% from next year. In addition, the threshold at which employers start to pay NI for an employee is to fall to £5,000 from £9,100.

This is expected to be a significant revenue raiser, but it potentially reduces the competitiveness of UK businesses. It could also lead to companies in the private sector restricting new hires, limiting pay rises, or scaling back growth plans.

6. State pension rises by 4.1%

A triple lock increase has been confirmed at an impressive 4.1%, driven by wage rises. This adjustment helps offset the loss of winter fuel payments this November and December.

Starting next April, the full New State Pension will rise from £11,502 to £11,976.

7. Higher taxes for private equity firms

Carried interest—the share of profits paid to private equity managers—is currently taxed in the UK at a 28% capital gains tax rate.

Beginning in April 2025, this rate will increase to 32%. Reeves also announced that further reforms to the carried interest rules will come into effect from 2026.

These adjustments are expected to reduce the capital available in the UK and could lead businesses to seek more favourable tax environments overseas.

8. Changes to non-dom rules from April 2025

Ms Reeves also closed one of the loopholes in the tax system, by replacing the non-dom tax regime with a new residence-based system to make sure that everyone who makes their home in the UK pays their taxes here too.

This includes ending the use of offshore trusts to shelter assets from Inheritance Tax and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime.

The changes to this regime are complex and beyond the scope of this article, but full details can be found in the government website.