On October 30th, Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer delivered the much-anticipated Autumn Budget for 2024. Due to rising living costs, taxes have been a major source of discussion, so the majority of the budget introduced new changes while denying other changes.
As specialists in accounting, we understand how such developments can significantly impact taxpayers. Here, we’ll explore the implications of the Autumn Budget for UK taxes, outlining the key reforms and highlighting prospective changes that could influence your financial planning.
Taxes Are Expected To Rise (But Not All)
The UK has been facing challenges such as high debt and rising interest, so taxes are the big focus of the Autumn Budget and expected to rise across the board. Reeves warned of a ‘£22bn black hole’ affecting the country’s finances.
Not everything is expected to increase, however. There will be no changes to headline rates of income tax or NIC. She also mentioned no changes to the VAT back during the Labour Party’s September conference.
Inheritance Tax
Inheritance tax is a type of tax you pay if you receive assets or any money from a deceased person’s estate. The UK inheritance tax change currently charges 40% above the individual nil rate band threshold of £325,000. You can double this amount if you’re in a marriage or civil partnership.
The nil rate band is how much of an estate a person can pass down to their beneficiaries without inheritance tax. The residential nil rate band allowance (or your home left to children or grandchildren) is £175,000.
If you exceed £2 million, your home allowance will shrink by £1 for every £2 above the threshold. These current rules are starting to be called the ‘death tax’ due to property price increases and are one of the more unpopular forms of UK taxes.
While most people with estate assets won’t pay inheritance tax, and no new relief or cuts were confirmed, keep an eye out for potential changes.
Capital Gains Tax
Capital gains tax refers to a type of levy made on the sale of an investment or capital asset (like a stock or a bond). Since capital gains taxes have been low, Reeves proposed a few reforms.
She’s suggesting taxing capital gains similarly to income tax rates, as well as taxing capital gains at one fixed rate below income tax’s top rate.
Pensions
A pension is a type of retirement plan your employer contributes to, either as a lump sum or a set monthly payment. While Reeves didn’t propose any changes to pensions, there’s speculation this approach could change in the future.
She recently cut winter fuel allowance for a large number of wealthier pensioners to start addressing public finances.
However, reducing pension tax relief is unlikely to be a focus of the country’s budget moving forward. As of now, you can still expect to receive pension tax relief at your income tax rate, such as 20% for basic income tax.
Inherited Pensions
Currently, you can pass on pension savings without tax if you die before the age of 75. Inherited pensions are also a subject of debate and a type of tax Reeves may propose changes for soon.
After 75, anyone who inherits your pension must pay income tax on any money they draw from it. Since the current rules are very flexible, creating more strict inherited pension taxes could be challenging for many.
Final Thoughts
There are a lot of changes and a lot of theorizing for the end of the year. This Autumn Budget has caused many people to wonder if these tax changes will finally start solving the country’s growing debt problems.
The lack of change to income tax, NIC, and VAT should be a welcome relief to taxpayers. Just keep an eye out for potential changes to pensions, capital gains, and inheritance tax (which we’re more than happy to help out with).
