The Autumn Budget 2024: top implications for individuals

After months of speculation, our first female Chancellor delivered the first Labour Budget for 14 years, badged as a Budget to ‘fix the foundations of our economy’.

Throughout her speech, Rachel Reeves emphasised stability and the need to invest, invest, invest.

As was well trailed in the media, there were significant changes announced to Capital Gains Tax (some immediate and some deferred) and Inheritance Tax, with the additional tax burden falling on those with capital assets rather than ‘working people’ with no changes to Income Tax or employees or self-employed National Insurance. As was expected from the Labour manifesto, the ‘non-dom’ tax status is to be abolished from April 2025.

Top implications

Changes to Capital Gains Tax

Immediate changes have been announced to align the rates of CGT for the sale of both residential property and other classes of asset, with an 18% rate applying to gains within an individual’s basic rate band and an 24% rate applying thereafter.

Business Asset Disposal Relief will remain in place, with a lifetime allowance of £1 million, but the rate of CGT charge will increase from 10% to 14% from April 2025, and 18% from April 2026.

Further details of the CGT changes can be found here.

Proposed changes to Inheritance Tax (IHT)

Two major changes were announced in respect of IHT.

The first is charging IHT on inherited pensions by bringing the value into an individual’s estate when calculating any IHT due.

The second is the restriction of 100% Business Property Relief and Agricultural Property Relief to the first £1 million of qualifying assets, and only allowing 50% relief on any excess value.

Both proposed changes are subject to a consultation process. Any changes are due to take effect from 6 April 2026 for IHT reliefs and 6 April 2027 for IHT on pensions, with the changes due to take effect from 6 April 2026 for IHT reliefs and 6 April 2027 for IHT on pensions.

Abolition of the non-dom regime

As expected, the remittance basis regime has been abolished and replaced by the new Foreign Income and Gains (FIG) regime. This applies to individuals who have been non-UK tax resident for at least 10 years. They can make a claim to the FIG regime for the first 4 tax years of UK residency and will not pay tax on the overseas income/gains nominated. These can be remitted to the UK tax-free.

There is an opportunity for individuals to remit funds previously protected by the remittance basis between 6 April 2025 and 5 April 2028 at guaranteed tax rates.

Domicile has been removed from the Inheritance Tax (IHT) regime, meaning the basis of whether non-UK situs assets are within the scope of UK IHT will be tested by one’s tax residency.

When an individual has been UK tax resident for 10 of the previous 20 tax years their worldwide estate will be within the scope of UK IHT. Once the individual has been non-UK tax resident for 10 years, their non-UK estate will be outside the scope of UK IHT.

It has been announced that where one has been UK tax resident between 10 and 20 years, when they leave, the number of years they are still within the scope of UK IHT for will be reduced, dependent on the years of residency.

For more information see our article on the changes to the non-dom regime.

Stamp Duty Land Tax on second homes

The surcharge rate applicable to the purchase of additional residential properties in England and Northern Ireland, by UK individuals and certain trusts, and any residential property purchases by a company, is increasing to 5% for transactions with an effective date (normally completion) on or after 31 October 2024. For further details, see our article on Stamp Duty Land Tax.

VAT on private schools fees and boarding services

The Chancellor confirmed that VAT will indeed apply to private schools from 1 January 2025. For more detail, see our article.

Conclusion

The proposed changes to Agricultural and Business Property Relief for Inheritance Tax will have a significant impact on those individuals with business assets with a value of more than £1 million, particularly for those who have significant asset value, but not significant available cash. This could affect the ability to pass businesses down to future generations without incurring significant tax charges, and is likely to make lifetime succession planning even more important to consider.

Individuals who are thinking of selling their trading businesses over the next few years should consider the timing to maximise the benefit Business Asset Disposal Relief.

Those people who are currently non-doms should understand the changes and consider if there is any planning to be undertaken before the rules change next April.

If the Autumn Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am. Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.