Autumn Budget – what does it mean for your customers?

Following our initial response, we've provided more detailed commentary below on some of the headline changes for customers.

Income Tax

The Income Tax thresholds are currently frozen until April 2028.

The government will not extend the freeze to the thresholds and these will increase in line with inflation from April 2028.

National Insurance Contributions

The rate of employer National Insurance contributions will increase from 13.8% to 15% from 6 April 2025.

The Secondary Threshold will reduce from £9,100 to £5,000 from 6 April 2025 until 5 April 2028 and increase by Consumer Price Index (CPI) thereafter.

The Employment Allowance will increase from £5,000 to £10,500 from 6 April 2025. The £100,000 threshold for eligibility for Employment Allowance will be removed, expanding this to all eligible employers with employer NICs bills from 6 April 2025.

Capital Gains Tax (CGT)

The main rates of CGT will be increased from 10% to 18% and 20% to 24% from 30 October 2024. There will be no change to the rates for residential property which are not eligible for Private Residence Relief.

The rates for Business Asset Disposal Relief (BADR) and Investors Relief (IR) will increase from 10% to 14% from 6 April 2025 and then to 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced from £10million to £1 million for all qualifying disposals made on or after 30 October 2024.

Inheritance Tax

The current inheritance tax thresholds are due to be frozen until April 2028. The government is extending this freeze for a further two years to April 2030.

The government is reforming agricultural property relief and business relief from April 2026. In addition to the existing nil rate bands and exemptions, the 100% rate of relief will apply to the first £1 million of combined agricultural and business assets and 50% thereafter.

The rate of business relief will reduce to 50% for shares designated as “not listed” on the markets of a recognised stock exchange (i.e. the Alternartive Investment Market (AIM)).

(See further comment on pensions and inheritance below)

ISAs

Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030.

The government will not proceed with the British ISA announced by the previous government.

Changes to the taxation of non-UK domiciled individuals

The government have confirmed they will legislate to abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence based regime from 6 April 2025.

Further details can be found in the technical note Reforming the taxation of non-UK individuals.

Pension death benefits and Inheritance Tax 

From 6 April 2027 pension death benefits will form part of the deceased’s estate for the purposes of Inheritance Tax (IHT) irrespective of who receives the benefits and in what form they’re paid. The only exemptions will be for Dependant’s Scheme Pensions (paid from Defined Benefit and Defined Contribution Schemes) and Charity Lump Sum Death Benefits.

The high level proposals are that Pension Scheme Administrators and the member’s Personal Representatives will need to liaise with each other to determine how much, if any, of the death benefits are subject to IHT. The Scheme Administrator will be responsible for deducting the IHT charge and reporting and paying it to HMRC.

The government has issued a consultation to look at the processes needed to implement this proposal which runs until 22 January 2025. Following this the government will issue a response and draft legislation for technical consultation, expected to be in April 2025.

Transfers from UK registered pension schemes to Qualifying Recognised Overseas Pension Schemes (QROPS)

Under current rules for transfers to QROPS a 25% Overseas Transfer Charge (OTC) will apply if the member is not based in the same country as the QROPS. There is an exemption if the member and the scheme are both in the EEA or Gibraltar. This exemption is removed with immediate effect.

There are, however, some transitional rules for existing cases which means that where we have had a formal transfer request before 30 October 2024 and the transfer is made before 30 April 2025 the old rules will apply and no tax charge will be due.

Some EEA countries don’t have any QROPS because of the way in which their pensions tax rules work, France being a prime example. Under the old rules you could live in France and transfer to a scheme in Malta and no tax charge would apply. The new rules will mean such transfers will now be subject to a 25% tax charge. (Note: the rule change means remaining in the UK whilst transferring to an overseas pension scheme will incur a 25% overseas transfer charge.)

Alistair McQueen, Head of Savings & Retirement