UK Budget 2024: Major Tax Reforms Reshape Investment, Inheritance, and Business Landscapes

🚨 UK Budget 2024 Highlights 🚨

Today, Chancellor Rachel Reeves introduced significant tax reforms in her 2024 UK Budget, touching on CGT, inheritance tax, National Insurance, and ending the non-dom regime. Here's a breakdown of what’s changing and how it might impact investors, employers, and family businesses:

📈 Capital Gains Tax (CGT)

The CGT rate has jumped, with the lower 10% rate now at 18%, and the 20% rate increasing to 24% on residential property. Hargreaves Lansdown’s Sarah Coles points out the challenges this creates for investors, particularly those with long-held investments. She notes that a reduced £3,000 annual allowance could lead to larger tax liabilities on modest portfolios, impacting long-term investment appeal in the UK.

💼 Employers’ National Insurance (NIC)

From April 2025, the Employers' NIC rate will rise by 1.2% to 15%, with a new earnings threshold at £5,000. This change may increase payroll costs and push businesses to explore salary sacrifice schemes. Quilter's Jon Greer highlights that while these schemes can help manage costs and support employee retirement savings, they could also strain wage growth and limit hiring.

🏦 Inheritance Tax (IHT) on Pensions

For the first time, inheritance tax will now apply to pensions passed on to beneficiaries. This means that pension funds inherited from loved ones may be subject to IHT, increasing the number of estates impacted by this tax. Claire Trott from St. James’s Place notes that while details are still emerging, this policy shift could have significant implications for families relying on inherited pensions for their financial security. There are still questions about how defined benefit schemes will be affected, especially for those with limited access to increased income to pay the tax.

In addition, BPR (Business Property Relief) and APR (Agricultural Property Relief) are now capped at £1 million per estate, with any amount above this threshold subject to a 20% tax rate. The Chancellor has also frozen the IHT nil rate band at £325,000, meaning more estates will fall under IHT as property values rise.

🚫 Abolition of the Non-Dom Regime

The non-domicile tax scheme is ending, replaced by a new residency-based regime. Craig Ritchie of GSB Wealth mentions that this shift could benefit UK expats planning to remain abroad, potentially allowing them to pass on wealth free of UK IHT.

Final Thoughts

These reforms mark a decisive shift, as Reeves aims to balance tax policy with economic growth. Investors, business owners, and families may need to adjust their financial strategies to navigate these changes effectively.

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