Personal Tax Autumn Budget Predictions 2024

As tax advisers, we need to consider all current and future changes happening in our field of expertise.

The next Budget date has been set for Wednesday, 30 October 2024, as Chancellor Rachel Reeves outlines plans to address a £20bn deficit.

This will be the first opportunity to see Labour’s tax policy direction under the new administration. Reeves has pledged not to raise income tax, national insurance, or VAT to protect “working people”. However, a significant shortfall revealed after a government audit, a confirmed 5.5% public-sector pay increase, and a 22% backdated rise for hospital doctors, mean tax increases and budget cuts are now expected.

As ever with a Budget, we don’t know what is going to be announced, but the Labour manifesto has hinted that these are areas being reviewed:

Furnished Holiday Lets (FHL)

The Government has already confirmed that the FHL rule changes, as proposed in the Spring Budget, will go ahead in April 2025.  

With the proposals, the impact will be the loss of pension tax relief, Business Asset Disposal Relief (BADR) – although this relief has already been hugely restricted – and the ability to claim full relief for mortgage interest which could have a significant impact on profits.

Pensions

We often explain to clients about making additional pension contributions to utilise allowances, making reference to tax band adjustments and saving 40%/45% tax, but it is possible that the Government will remove this tax relief in the Budget.  Should you therefore be thinking about making those contributions before 30 October? 

The standard lifetime allowance was abolished from 6th April 2024. Could this be reintroduced? Speaking to other professionals, it seems increasingly unlikely on the basis we are through a complete tax year, that the relaxation could be rolled back. A new cap could, however, be proposed.

Capital Gains Tax

There have been mutterings of aligning the CGT tax rates with income tax rates.  As the annual exempt allowance has been reduced in recent years, there are few options left to make this a more profitable tax for the government.  CGT was previously levied at marginal rates, so this would be reverting to old rules and it won’t be a popular change.  It could stall the housing market and business transactions so we wait and see.  If you are thinking about making a sale – 30 October is a very tight deadline but it’s likely, as with previous changes, that if the contracts have been exchanged, old rules would prevail.

Gift Holdover Relief

This allows for the gifting of business assets with no CGT charge, by deferring the gain onto the recipient.  This relief is used a lot in conjunction with IHT planning, and it has significant tax benefits.  Again, it seems an unlikely change, but if the Government is looking for an immediate cash injection, removal of this relief could be an option.

If you are thinking of gifting family company shares down the generation, can you get this organised before the Budget, just in case?

Inheritance Tax (IHT)

Anything could change but some possibilities are:

Potentially Exempt Transfers (PETs)

Removal of this allowance would make any gifts above the standard exemption liable to IHT.  If you are considering making gifts of any significant amount, we would suggest this is done so before 30 October.

Agricultural Property Relief (APR) and Business Property Relief (BPR)

Agricultural Property Relief is available on death to reduce IHT.  It has been a significant relief for farmers over the years, to allow the passing down of land and buildings.  If this goes, and there is a trade, then BPR should, in part, cover but it is important that clients are aware of the possible impact.  We will be following up with any clients affected by this.

Double Charge

Could the removal of the CGT tax-free uplift be brought in on death?  This would mean that your assets would be liable to CGT and IHT on the death estate. It will be difficult to plan for this one without more information, and lawyers are of the opinion that relief would be given against IHT for the CGT paid, but we await more news here.

As you can see, without knowing what’s to come, we can only make suggestions as to how you could potentially protect yourself against any changes post-budget.

Our tax team are fully up-to-speed and if you have any questions or concerns, get in touch and we will be happy to help.