Autumn Budget – What Might be Instore?

With Chancellor Rachel Reeves’s first Budget scheduled for Wednesday 30th October 2024, we have set out below, our thoughts on some of the rumoured tax rises required to address the nation’s ￡20 billion deficit.

While Reeves has pledged not to raise income tax, national insurance or VAT, other tax increases and spending cuts may still be on the horizon, especially in light of a ￡22 billion shortfall, public sector pay rises, and other recent financial commitments. Though details will not be confirmed until the Budget is officially released, Labour’s manifesto has hinted at potential changes in key areas. We have summarised the most?relevant updates for you below:

Furnished Holiday Lets (FHL)

The Government has already confirmed that the rule changes for FHL, proposed in the Spring Budget, will come into effect from April 2025.

Key changes include the removal of pension relief, further restrictions on Business Asset Disposal Relief (BADR), and the reduction of full interest relief claims. These adjustments could significantly impact your profits, so it is important to be prepared.

Please see our article regarding Furnished Holiday Lets for more information.

Capital Gains Tax (CGT)

There have been discussions about aligning Capital Gains Tax rates with Income Tax rates, which could result in significant changes. With recent reductions in the CGT allowance, further adjustments may be on the table.

If you are planning any major sales or considering the closure of your business, it may be beneficial to act quickly, as any changes could take effect after the Budget. In many cases, contracts exchanged before the announcement may still follow the current rules.

Please see our article concerning Capital Gains Tax for more information.

Gift Holdover Relief

This relief allows for the deferral of Capital Gains Tax when business assets are gifted. If the Government seeks immediate revenue, this relief could be a target. If you are considering gifting business assets or shares to family members, it might be worth completing this before the Budget to ensure you benefit from the current rules.

Inheritance Tax (IHT)

There have been a lot of rumours regarding the reform of Inheritance Tax and while some of the speculation involves complex changes to the system, several areas of Inheritance Tax could easily be targeted including:

• The removal of Agricultural Property Relief (APR) and Business Property Relief (BPR): APR can help reduce IHT on agricultural assets, which has been a key tool for farmers to allow the passing down of land and buildings. BPR provides relief from IHT on certain assets such as shares in unquoted companies.
• Reform or Removal of Potentially Exempt Transfers (PETs): PETs allow gifts (over the normal exempt limits) to be made without triggering immediate IHT and can exempt these gifts entirely if the donor survives seven years. There is speculation that the Government may remove this exemption and so thought should be paid to making any intended significant gifts before the 30th October.

Our new private client team can assist on these matters as well as any other IHT or Will related advice.

Pensions

It is possible that the Government may remove or amend pension tax relief for individuals who make higher and/or additional pension contributions and instead introduce a flat rate regardless of the saver’s income. If you are a higher rate taxpayer making personal pension contributions it may be wise to seek financial advice and consider making your contributions before the 30th October.

The standard lifetime allowance was abolished in April 2024, and while it is unlikely this will be reversed, it is always worth being aware of any potential changes.

For expert advice and support in relation to this matter, please?enquire?or contact us at?[email protected].

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute accounting, legal or tax advice. Professional advice should be obtained before taking or refraining from any action as a result of the contents of this document.