The Autumn Budget 2024, presented by Chancellor Rachel Reeves, outlines vital economic measures impacting pensions and taxes.
- The government commits to maintaining the State Pension Triple Lock, boosting pensioners’ income by 4.1% from April 2025.
- Personal tax thresholds remain frozen until 2028, subtly pushing individuals into higher tax brackets due to fiscal drag.
- Capital Gains Tax rates are set to increase, impacting basic and higher rate taxpayers significantly from October 2024.
- Inheritance tax rules tighten, with the inclusion of inherited pensions from April 2027 posing new financial planning challenges.
The Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget 2024, detailing crucial financial decisions expected to impact various groups across the United Kingdom. The government’s commitment to maintain the State Pension Triple Lock stands out as a key highlight, ensuring pensioners’ income will rise by 4.1% from April 2025. This adjustment aligns with earnings growth and translates into an increase of up to £470 for over 12 million pensioners in the 2025-26 financial year.
In a less favourable move, the freeze on personal tax thresholds—covering National Insurance and income tax—will extend until 2028. This decision means many individuals will face what’s known as ‘fiscal drag’, where they are pulled into higher tax brackets despite only receiving inflationary pay increases. Jonathan Watts-Lay of WEALTH at work commented on this measure, highlighting the inevitability of many transitioning to higher tax rates until the freeze is lifted.
The budget also brings notable changes to Capital Gains Tax (CGT). From 30 October 2024, the basic rate will climb from 10% to 18%, while the higher rate will surge from 20% to 24%. This increase signifies a substantial adjustment in the tax landscape, demanding careful financial planning from affected taxpayers. Watts-Lay advises that employees utilise available allowances to secure tax-efficient savings, especially given the reduction in the CGT threshold from £12,000 to £3,000 in recent years.
Additionally, inheritance tax provisions are tightening, with inherited pensions and death benefits slated for inclusion from April 2027. This announcement necessitates strategic retirement planning, ensuring individuals consider all potential retirement incomes. Highlighting the importance of this development, workplaces are encouraged to provide comprehensive financial education to aid employees in navigating these new tax structures.
Regarding ISAs, there remains no change in the allowance, which is set at £20,000 until April 2030. This consistency offers individuals a stable means to save tax-efficiently. Meanwhile, the absence of a stamp duty update in the budget earmarks a missed detail that will lead to increased costs for first-time buyers and home movers from March 2025, as highlighted by Watts-Lay.
The Autumn Budget 2024 introduces significant fiscal changes that warrant careful consideration and strategic financial planning.
