2024 Autumn Budget Overview: The key announcements from Chancellor Rachel Reeves

It has been one of the most hotly anticipated Budget announcements in memory and we finally have the outline of the government’s fiscal plan for the nation.

Before getting into the details, Chancellor Rachel Reeves provided a substantial amount of context on the financial position her decisions had been based on, as well as amended forecasts of inflation and economic growth from the Office of Budget Responsibility and  acknowledgement that this was the first Budget in history delivered by a female Chancellor.

Here, we provide an overview of the biggest announcements for individuals in the 2024 Autumn Budget.

IHT to be levied on defined contribution pensions

Potentially the most impactful change for individual financial plans in this Budget was the announcement that from April 2027, defined contribution (DC) pensions will be included in the assessment for IHT.

Under the current rules, assets held within DC pension schemes are completely outside of IHT rules. For this reason, many financial planners structure retirement income to limit drawdown from pensions, instead prioritising spending down assets that would potentially attract an IHT liability.

Business property and agricultural relief cut

The changes to IHT rules will also extend to agricultural property and business property relief (BPR). This includes qualifying business assets, but there are also a wide range of investment products designed to fall under BPR rules.

Previously, these assets received 100% relief from IHT, with new rules now providing a tax-free threshold of £1 million, with any amount above that being liable for IHT with a 50% relief. This effective tax rate of 20% will also extend to Alternative Investment Market (AIM) which were previously exempt from IHT if held for at least two years at the time of death.

IHT threshold freeze extended to 2030

In the last hit for IHT, the current nil rate band of £325,000 and residence nil rate band of £175,000 have been frozen for a further two years. Initially set to see inflation-level rises from 2028, this freeze has been extended until 2030.

Capital gains tax rates to increase

As was widely expected, capital gains tax (CGT) will increase. From today, the lower rate of CGT will rise to 18% from the current rate of 10%, and the higher rate will be increasing to 24% from its current level of 20%.

This will effectively remove the CGT surcharge on residential property, which will remain at the current rates of 18% and 24%.

Taxes to increase on tobacco, vapes and soft drinks

There were a number of increases announced to duty, with tax on tobacco to rise by the Retail Price Index (RPI) plus 2% on an annual basis. Hand-rolled tobacco will be hit with a 10% increase in duty this year, and there will be a new flat-rate duty on vaping liquid introduced from 2026.

Stamp duty land tax on second properties sees big rise

Those looking to purchase second homes will have to stump up a significantly higher amount for stamp duty land tax going forward, with the surcharge rising from the current rate of 3% to a new rate of 5%.

This change comes in force tomorrow (31 October 2024), giving prospective second-home buyers little time to avoid this new rate.

Fuel duty to remain frozen while air passenger duty set to rise

However, not all duty is going up, with fuel duty set to stay at its current level and the existing 5p per litre cut also set to stay in place for another year.

And while increased air passenger duty on economy flights will add just an extra £2 to a short haul flight, private jets will see an increase of 50% on duty. The Chancellor noted that this equates to around £450 for a flight to California.

Non-dom regime removed

Another announcement which preceded the Budget was the abolishing of the non-dom tax regime. More interesting was the Chancellor’s statement that domicile status will be removed entirely from April 2025, with a new residence-base scheme to be introduced.

VAT relief and business rates relief on private schools confirmed to be removed

The removal of the VAT exemption for private school fees was confirmed, which will see VAT added to these fees from January 2025. Reeves also announced that the government will seek to remove private schools’ business rates relief from April 2025.

Threshold on personal tax and national insurance to begin to rise from 2028/29

The current thresholds for personal tax and national insurance have been in place since 2022, providing a real time reduction in their level over this time. It had been widely expected that the freeze would be extended beyond the current plan for 2028.

However, Reeves has said that from the 2028/29 tax year, personal tax thresholds will increase in line with inflation.

Employer NI to increase from 13.8% to 15%

While the government has kept their promise not to increase employee NI, it was confirmed that employer NI will be going up from 13.8% to 15%. Perhaps the bigger change was the announcement that the earnings threshold at which employers must pay it is being reduced from £9,100 per year to £5,000 per year.

Employer NI won’t have a direct impact on individual pay, but as discussed in our recent article, increased employment costs could have wider implications for job security and future potential pay increases.