The Autumn Budget 2024 sets the stage for significant fiscal policies in the UK, aimed at maintaining economic stability and providing support to various sectors.
- The government confirms the continuation of the State Pension Triple Lock, offering a safeguard for pensioners against inflation and wage growth.
- Personal tax allowances remain frozen, extending the fiscal drag effect, while providing potential relief from 2028 onwards.
- Increases in Capital Gains Tax rates herald changes, impacting tax efficiency and financial planning for individuals and businesses alike.
- Inheritance tax and stamp duty changes signal ongoing fiscal adjustments, requiring proactive financial and estate planning.
In the Autumn Budget 2024, the government’s commitment to the State Pension Triple Lock was affirmed, ensuring pensioners will benefit from the higher of wage inflation, Consumer Price Index (CPI), or 2.5%. This adjustment, effective from April 2025, will result in a 4.1% increase in the basic and new State Pension, potentially benefiting over 12 million individuals with an increment of up to £470 annually.
Personal tax allowances will remain frozen, with the Chancellor announcing an end to this freeze from 2028. Until then, the freeze contributes to ‘fiscal drag’, where inflationary pay increases may inadvertently push individuals into higher tax brackets. This nuance in tax policy has raised concerns about its impact on taxpayers, as noted by financial expert Jonathan Watts-Lay.
The ISA allowance remains untouched at £20,000 until April 2030, allowing individuals to continue maximising their tax-efficient savings options. Watts-Lay emphasises the importance of this policy for savers, highlighting the benefit of maintaining robust saving practices amid ongoing economic shifts.
Significant changes to Capital Gains Tax (CGT) were revealed, with basic and higher rates rising to 18% and 24% respectively, starting from 30 October 2024. This increase underscores the necessity for individuals to utilise available allowances effectively. Watts-Lay advises that workplace strategies, such as implementing workplace ISAs, could mitigate the impact by allowing tax-free transfers of maturing shares.
The inheritance tax landscape remains largely unchanged until 2030. However, the introduction of inherited pensions into the inheritance tax framework from April 2027 marks a notable shift. Watts-Lay suggests that comprehensive retirement planning, encompassing all forms of retirement income, is critical for optimising financial outcomes.
Although not addressed in the budget speech, upcoming adjustments to stamp duty thresholds are anticipated. From March 2025, first-time buyers will face stamp duty on properties over £300,000, down from the current £425,000, while home movers will encounter charges on purchases above £125,000, reduced from the present £250,000. Such changes could mean increased tax expenses for some property buyers.
The Autumn Budget 2024 underlines the importance of strategic financial planning amidst evolving fiscal policies.
