Autumn Budget 2024: Key Changes That May Impact Your Wealth

The Autumn Budget 2024 introduces significant tax changes that could affect your wealth and estate plans. Here are some of the key points you need to know:

• Pensions Now Subject to Inheritance Tax (IHT): From April 2027, unspent pension funds will attract inheritance tax, reducing pensions’ effectiveness as inheritance planning tools.
• Higher Capital Gains Tax (CGT) Rates: CGT on shares has increased to align with property rates, moving from 10% to 18% for the basic rate and from 20% to 24% for the higher rate.
• Restrictions on Inheritance Tax Reliefs: Agricultural and business property reliefs are now more limited, increasing tax exposure for larger estates. For example, the inheritance tax relief on UK-listed ‘AIM’ shares will be halved, effectively resulting in a 20% IHT rate where it was previously IHT-exempt.

Pensions and Inheritance Tax: A New Challenge

Previously, pensions offered a tax-free way to pass on wealth. Now, unspent pension pots are subject to inheritance tax, reducing their value in estate planning. To offset this, trusts may offer a structured alternative for transferring wealth while minimising IHT exposure.

Higher Capital Gains Tax on Shares/Funds

The alignment of capital gains tax on shares with property increases taxes on gains from traditional non-ISA investments. For those looking to reduce tax burdens, investment bonds may provide a tax-efficient growth alternative, as gains are not subject to immediate CGT. When you make withdrawals from investment bonds, they’re treated as income, potentially allowing for tax savings if timed well with your income levels.

Takeaways

These budget changes highlight the importance of reviewing your financial plans to remain tax-efficient in the new landscape. For guidance on adapting your strategy, please feel free to get in touch.

With the budget only just announced, finer details are yet to emerge. While planning ahead is key, a degree of patience will also be essential as we await further clarification.