The Autumn budget announcement 2024 made by Chancellor of the Exchquer Rachel Reeves earlier this week, will see significant changes for business owners, pensioners, mortgage holders and landlords.
We were lucky enough to be interviewed on our budget predictions on Greatest Hits Radio Norfolk, BBC Radio Norfolk and appeared in the EDP's double page budget spread!
We've been providing advice to our customers in the run up to the fiscal announcements and are opening our doors to anyone who wants to get some free advice on how the changes are set to impact them.
Check out our video here:
The key highlights:
£41bn additional tax revenue is needed by 2030
Employer's National Insurance (ERNI) is a contribution that employers pay to HMRC on behalf of their employees. An increase in the rate of this will be the single biggest revenue raiser of the budget
This is closely followed by an increase in Capital Gains Tax – the profit when you sell an asset - from 10% to 18% with the higher rate maintained at 24%
The Office for Budget Responsibility (OBR) has said that the impact of the changes should increase growth for 2025, but will dip from 2026 onwards.
Inflation is now not likely to come down as much as previously predicted – this has the potential to keep interest rates higher for even longer meaning borrowers with mortgages may see their interest rates remain higher, whilst savers with cash deposits benefiting from higher interest for longer on their cash savings.
How will the budget affect workers incomes?
The Government announced a freeze on income tax and National Insurance thresholds for workers but said that firms must pay National Insurance on workers’ earnings above £5,000.
Employer’s NI, which is what businesses pay per employee, will increase from 13.8% to 15% - a 1.2% increase, whilst also lowering the threshold at which employer NI tax is due from £9,000 to £5,000.
As for how this affects workers, this depends on what business owners can do. Possible decisions will include whether these higher tax costs are funded by lower profits, higher prices, fewer employees, or lower salary levels than planned.
The OBR believes some of these costs will be passed onto employees indirectly by lower wage growth, or a reduction in bonuses. The OBR expects around 60% of these tax costs will be passed onto workers through lower wage growth and consumers through higher costs.
The good news is that Employment Allowance – designed to help smaller businesses with employment costs by reducing their National Insurance liability – was increased from £5,000 to £10,500, which will help offset some of the increased NI tax burden on small businesses.
For those with elder relatives what will this mean?
For those who own their own home, assuming house prices continue to rise and any savings or investments increase in value, their estate will effectively pay more Inheritance Tax. From 2027, any defined contribution pensions will also be brought into the taxable estate, meaning more wealth will be taxed on death.
However, we're pleased to see the Government has not scrapped the “main residence nil rate band” (MRNRB), introduced in April 2017. This an additional tax allowance on top of the standard nil rate band (the amount of your estate which can be passed on to your beneficiaries free from inheritance tax after death). So if the main residence of the deceased relative is passed to a direct descendant, it should help protect family homes.
How might the budget impact Norfolk second homeowners or buyers?
The stamp duty surcharge, paid on second home purchases in England, is now payable with immediate effect - this is a raw deal for buyers and especially for those who exchanged contracts last week or this week and are now completing today or in a few days.
The surcharge has increased from 3% to 5% of the property sale price. This is set to effect the sole proprietor, but will also impact joint mortgages for family members trying to help their children buy their first homes, but there are alternatives that a mortgage adviser will be able to assist with and mitigate any unnecessary tax surcharge.
The direction of mortgages interests is currently unclear; Santander are dropping fixed rates, but Virgin Money announced that they are increasing some of their fixed rates.
Will there be an changes to pensions?
From 2027, pension values will be included in individual estates and taxed under Inheritance Tax, where currently they do not. This makes it a valuable benefit for passing wealth down to the next generation - which as a reminder, this is not what pensions are primarily intended for.
A pension is something for a saver to use when they retire to provide them with an income once they’ve retired. This measure is set to generate £3.4bn over the next four years for the government.
As for how this will be implemented, this is yet to be seen and a consultation period of 12-weeks until mid January 2025 will now take place. This is because pension legislation is complex and changes need to be considered carefully.
We are pleased to see the government has left the Lump Sum Allowance - the 25% tax-free lump sum - alone; which is an attractive benefit for retirees starting their retirement.
Other announcements:
Agricultural relief limit: there will be a new agricultural tax relief and business relief limit of £1m prev uncapped) from April 2026. This is expected to generate £1.5bn over the next 4 years. The first £1m of combined business and agricultural assets receive 100% relief. For assets over £1m, inheritance tax will apply with 50% relief. Assets subject to 50% relief already will not count towards the £1m allowance. Any unused allowance will not be transferable between spouses and civil partners.
Trusts: will have a combined £1m allowance and each trust in existence on 30 October 2024 will have its own allowance. For trusts set up after this date, legislation will be put in place so the allowance is divided across the new trusts.
AIM shares: Shares which are “not listed” (which include AIM shares) will have a 50% relief applied from April 2026 and anything over the £1m relief.
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