Autumn Budget Key Points: How Will your Finances be Affected?

In a landmark moment for the UK's economic landscape, Chancellor Rachel Reeves has delivered her inaugural budget, bringing significant changes that could impact your financial planning and long-term goals. 
 

Some changes were expected, as we explored in our Autumn Budget predictions, and some were more of a surprise.
 

While the full details and impact of the budget are still unfolding, we've analysed and compiled the key policy announcements to explain their potential implications.
 

Tax for Employees

It was confirmed that in line with the manifesto promise, Labour will not raise any income tax or national insurance for employees. It was also confirmed that fuel duty was frozen, and the temporary 5p fuel duty was retained.
 

Under the Tory government, personal tax thresholds were frozen until 2028 and it was confirmed that from 2028-29 personal tax thresholds will be uprated in line with inflation once again.
 

Capital Gains Tax (CGT)

It has long been suspected, and hinted at through the wording from the election onwards, that one of the taxes that would see a substantial rise was CGT.
 

The chancellor confirmed an increase in the rate paid by basic-rate taxpayers from 10% to 18% and from 20% to 24% for a higher/additional rate payer from 30th October.
 

Example:

If you held an investment that you had purchased for £100,000 that increased in value to £150,000, you would have a £50,000 gain.
 

Individuals benefit from a capital gains allowance of £3,000, and therefore £47,000 of the gain would be subject to CGT.
 

Under the previous rules, the tax on this would be £4,700 for a basic rate taxpayer or £9,400 for a higher/additional rate taxpayer.
 

Following this rule change, the CGT liability would increase to £8,460 for a basic rate taxpayer or £11,280 for a higher/additional rate taxpayer.
 

Potential financial planning solutions

There are a number of potential planning ideas that could be utilised to mitigate CGT hikes:
 

• Timing of asset sales in line with wider plans
   
• Making use of spousal allowances
   
• Utilising tax-advantaged investment schemes
   

Pensions

Pension Tax Advantages

It was pleasing to see that the tax-free cash entitlement of up to 25% was maintained and the speculation around the removal of higher rate tax relief on contributions turned out to be untrue.
 

New Changes to State Pensions

Basic and new state pension payments will go up by 4.1% next year as Labour have stuck to their commitment to maintain the "triple lock".

This will see a full state pension entitlement increase to £11,975.60 annually, an increase of £473.

Pensions and Inheritance Tax (IHT) Changes

It was confirmed that pensions passed on will be subject to IHT from 2027.
 

Most pensions are currently exempt from IHT and not classed as part of your estate when you die. This makes them under the previous rules, a particularly effective IHT planning vehicle.
 

This is also coupled with an IHT threshold freeze until the next election.
 

Example:
 

This is potentially going substantially impact a lot of individuals across the UK.
 

An example of a household impacted by this may be as follows:
 

• Home - £500,000
   
• Cash - £50,000
   
• Chattels - £25,000
   
• ISAs - £100,000
   
• Pensions - £500,000

With pensions outside of the estate, there would be no IHT liability for this household assuming the family home is left to direct family members.
 

As a result of the changes to the budget, the estimated impact would be an IHT bill of £70,000.
 

Potential financial planning solutions

There are a number of potential planning ideas that could be used in the above circumstance:
 

• Using comprehensive cashflow modelling to understand how much is ‘required capital’ and looking at how gifts can be made directly to family members
   
• Looking at trust planning to reduce IHT
   
• Considering Expression of Wishes and the planning opportunities for Pension
   
• Death Benefit Trusts
   
• Drawing monies from the pension and mitigating the resulting liability / continued IHT liability through tax-efficient investment structures
   
• Taking monies from the pension scheme to fund insurance policies paid into trust
   

The movement of pensions into the scope of IHT will undoubtedly impact the financial planning of many and will require changes to long-term financial plans.

However, as shown above, there are a number of wealth management strategies that we will be able to utilise to mitigate this.
 

Alternative Investment Market (AIM) shares

For individuals wanting to mitigate IHT whilst retaining access to capital, especially for ISA funds, a common strategy was to invest the funds into AIM market shares, which often held a 100% exemption from IHT.

As a result of the rule changes, these will now benefit from a reduced 50% discount. Whilst this remains worthwhile considering given that it takes the effective IHT rate from 40% to 20%, it certainly becomes less appealing.
 

Business Asset Disposal Relief

BADR would be kept at £1m, and would remain at 10% this year, rising to 14% in April 2025 and 18% in 2026-27.

For those selling businesses or liquidating their company, this could mean a potential increase in the tax liability of the business sale of £80,000.

Continuation of VCT/EIS legislation

Aventur's holistic financial planning service provides the opportunity to optimise tax advantages investments as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS).
 

These offer 30% tax relief on investments made and a whole host of other advantages from It was confirmed that these will remain in place until 2035.
 

Private School Fees and VAT

Somewhat controversially VAT is set to be introduced to private school fees from January 2025, meaning tuition and boarding fees at independent schools will be subject to a 20% VAT charge. 

For those affected, this additional expense will likely require adjustment to long-term financial plans.
 

Further information about the VAT charge for Private School fees can be found here, with additional information likely to be released closer to the January deadline.
 

Stamp Duty Increase

Stamp Duty was announced to increase for second homes, from 2% to 5% from 31st October.

Homes in the purchase process that are set to complete after this date will likely be subject to the new rates. Information around the new rates and who is likely to be affected can be accessed here.

These budget announcements present both challenges and opportunities for more strategic wealth management.

And while the impact of these announced changes may seem unsettling, informed planning could be the best defense for many. 

One thing is clear though, and that is that the budget's complexities will require truly personalised advice. Our team of financial experts are ready to:

• Analyse your specific financial situation
• Develop tailored strategies
• Mitigate potential tax impacts

Get in touch today to discuss your current financial plans or for more information about how the budget could affect your plans.
 

*Information correct at the time of publishing. This article is provided for information purposes only and should not be taken as individual advice. Aventur is not responsible for the content of 3rd party websites.