The Budget 2024: Rachel Reeves, the UK’s first female Chancellor of the Exchequer, delivered this week the first Labour Budget in 14 years. It introduced the largest tax increases since Dominic Lawson’s 1993 Budget, with businesses asked to shoulder much of the burden.
But, as was widely expected, the Labour Chancellor also had wealthy individuals in her sights. Here are the four key changes from the Budget 2024 that might affect you and your family.
Inheritance Tax
Despite widespread concern that major changes to inheritance tax were on the cards, the Chancellor chose not to change the lifetime gifting rules and has frozen once again the nil rate band at £325,000. Instead, she chose to focus on pensions and reform of Business Property Relief (BPR) and Agricultural Property Relief (APR).
Currently, pensions are not subject to IHT, meaning that pensions have, for some, been a valuable IHT planning strategy. But from April 2027, pensions will fall into an individual’s estate on death and be subject to IHT.
Pensions do remain a useful way to provide for you and your family in old age, but individuals will need to keep in mind that IHT benefits will diminish over time and may wish to take advice.
APR and BPR will from April 2026 change with the 100% relief applying to a combined £1m cap, with values over that benefiting from a 50% relief. There is a risk that farming and land-owning businesses may have to sell land to meet IHT demands on the death.
Whilst the fine print of the detail has yet to be seen, there will until April 2026 be opportunities for landowners and farming businesses to make gifts to the next generation or settle assets into trusts to benefit from the current and more generous reliefs.
Capital Gains Tax
Immediate changes to Capital Gains Tax (CGT) have been announced, with the lower CGT rate increasing from 10% to 18% and the higher rate from 20% to 24% in a move that will hit small investors. This change brings CGT rates in line with rates on second homes.
Entrepreneurs will however face higher rates of CGT on the sale of a business. Currently, Business Asset Disposal Relief means business owners pay a much lower rate of CGT, just 10%, on gains of up to £1million.
From April 2025, that rate will increase to 14% with a further increase to 18% in 2026. Business owners planning an exit have a short 18-month window in which to sell if they wish to take advantage of the lower rate of CGT.
Stamp Duty on second homes
Currently, individuals buying a second home will pay a 3% surcharge on Stamp Duty Land Tax (SDLT), with UK non-residents paying a further 2%. Companies purchasing residential property over £500,000 may find a super rate of 15% applies, although several reliefs are available.
With immediate effect, the surcharge on second home purchases increases to 5%, and the super rate for companies increasing to 17%. The additional 2% surcharge for UK non-residents remains unchanged.
Non doms
As widely expected, the government confirmed changes to the non dom regime withing the Budget 2024. The remittance basis regime has been abolished and is to be replaced by the Foreign Income and Gains (FIG) regime. More information on this regime can be found here.
Domicile has been removed from the IHT regime, replaced by tax residency. Where an individual has been UK tax resident for 10 of the previous 20 years, their worldwide estate will fall within the UK IHT regime. Conversely, once an individual has been non-UK tax resident for 10 years, their non-UK estate will fall outside the UK IHT regime.
To understand how the Budget will affect you and your family contact our Private Client team.
Contact our Private Client Solicitors
If you are in need of advice or assistance on any of the legal issues mentioned in this article, please contact any member of our experienced Private Client team on 020 7631 4141 or email privateclient@bishopandsewell.co.uk
The above is accurate as at 01 November 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
