What to expect in the UK Autumn Budget 2024

The 2024 Autumn Budget, set for 30 October, will be one of the most closely watched in recent years. With the new Labour government facing significant economic challenges, Prime Minister Keir Starmer and Chancellor Rachel Reeves have indicated that tough measures lie ahead.

Starmer’s remark that “those with the broadest shoulders should bear the heavier burden” suggests that wealthier individuals and businesses may face higher taxes as part of the government’s efforts to raise revenue and address fiscal imbalances.

We explore what high-net-worth individuals (HNWIs) and businesses can expect from the upcoming Budget, based on known proposals and the political environment.

If you have any questions about the Budget and how it could impact you, our bankers and wealth planners are happy to help so feel free to contact them.

Potential changes to capital gains tax (CGT)

One area that may be a focal point of the Budget is capital gains tax (CGT). Currently, CGT rates are significantly lower than income tax rates, with some basic-rate taxpayers facing 10% on most gains and 18% on residential property, compared to income tax rates of 20%.

There has been speculation that the Chancellor may seek to equalise CGT with income tax rates, which would represent an increase in the tax burden on capital gains for wealthier individuals.

For high-net-worth individuals, this could mean that gains on investments and property are taxed at 45%, depending on their income bracket. This may have a significant impact on those looking to sell assets or liquidate investments.

Business owners considering the sale of assets should be particularly mindful, as Business Asset Disposal Relief (formerly Entrepreneurs' Relief) may also be reviewed. Currently, this relief allows business owners to pay a reduced 10% CGT on lifetime gains up to £1 million.

Inheritance tax (IHT) adjustments

Another potential target for reform is inheritance tax (IHT). IHT receipts have been rising, even without legislative changes, due to the freeze on the nil-rate band (set at £325,000) and the residential nil-rate band (£175,000). With inflation and rising asset values pushing more estates into taxable territory, the Chancellor may not need to adjust rates to increase revenue – simply maintaining the freeze will continue to draw more estates into the IHT net.

Reeves could also review exemptions such as the IHT exemption on pension assets or Business Relief, which currently allows certain business assets to be transferred free of IHT. The IHT reliefs on some agricultural property may also be scrutinised.

Pension reforms

Labour has already signalled its intent to review the pension system. There is talk of changes to the 25% tax-free lump sum along with the reintroduction of the lifetime allowance. There could also be adjustments to pension tax relief.

One suggestion is the introduction of a flat rate of tax relief, which would lower the relief available to higher-rate and additional-rate taxpayers, many of whom are HNWIs. Another consideration is bringing pensions back into the estate for IHT purposes.

Wealthier individuals may find pension savings less tax-efficient if a flat rate is implemented, reducing the incentive for higher contributions. Maximising pension contributions under the current rules – up to £60,000 annually, with the option to carry forward up to £200,000 – could help HNWIs capitalise on the existing system.

ISAs

Another area that may see change is Individual Savings Accounts (ISAs). The Chancellor may consider imposing a lifetime limit on ISA savings or reducing the annual allowance, which currently sits at £20,000.

While no major increases to income tax, VAT, or National Insurance are expected, changes to ISAs or CGT, remain a viable route for revenue generation.

Corporate tax and business implications

While Labour has committed to not increasing the headline rate of corporation tax, there could still be changes that impact businesses, particularly around tax reliefs or allowances.

Labour has committed to releasing a roadmap for business taxation within six months of the election, and the Chancellor has confirmed it will be published on Budget day.

This should provide a timeline for the promise to replace business rates and Labour could also give clarity on the pledge to reform the UK’s planning system. They may also look at increasing the size threshold for SMEs to remove administration burdens.

Business owners may also need to be wary of changes to CGT if they plan to sell assets, and they should keep an eye on any reforms to research and development tax credits or the investment allowances that could affect corporate tax planning.