By Paul Welsh, Chartered Financial Planner, FPC
The Autumn Budget 2024 introduces several key changes that will significantly impact financial planning, particularly for business owners and high earners.
Depending on one’s circumstances, there are a range of financial strategies which might be considered and adapted to minimise their impact.
Below we touch on some of those changes, as well as some things to consider over the next 12 months and beyond.
Capital Gains Tax (CGT)
The standard CGT rates have already increased:
- The lower rate is now 18% (up from 10%)
- The higher rate is now 24% (up from 20%)
These changes make active tax management and the use of appropriate tax-efficient investment strategies even more crucial for high-net-worth individuals.
Business Asset Disposal Relief (BADR) Changes
The most pressing concern for business owners considering an exit is the upcoming changes to Capital Gains Tax BADR:
- From April 6, 2025, the BADR tax rate will increase from 10% to 14%
- A further increase to 18% is scheduled for April 6, 2026
If you’re contemplating selling your business or shares, acting before April 2025 could result in substantial tax savings. The £1 million lifetime allowance remains unchanged.
Business Relief
The rate of inheritance Tax (IHT) relief for business property has been reduced from 100% to 50% on business assets worth over £1m, resulting in an effective rate of IHT of 20% for assets over that amount. Bringing business assets into the estate for IHT raises some serious questions for business owners around how such a tax charge would be funded.
Pension Considerations
Pensions will also now be included in a person’s estate for Inheritance Tax purposes from April 2027. This change could affect your long-term estate planning strategies and could also change the calculus for cash flow delivery planning.
Corporate Taxes considerations
The main rate of Corporation Tax remains stable, along with the small profits rate, providing some relief, and a new corporate tax roadmap aims to offer businesses more certainty for future planning. However, a significant change for employers is the increase in the main rate of employer’s National Insurance to 15% from April 2025. This will impact your business’s payroll costs and should be factored into your 2025 financial projections.
Property Investments
For those with property portfolios or considering property investments, the Stamp Duty Land Tax surcharge on second homes has been increased from 3% to 5% from 31st October 2024
Strategic Planning for 2025
- Exit Planning – If you’re considering selling your business, accelerating your plans to complete before April 2025 could result in significant tax savings due to the BADR changes.
- IHT Mitigation and Succession Planning – review the impact of the forthcoming changes to business relief and pensions in the context of the IHT impact on your estate and your succession plans. Gifting some of your business assets to trusts could reduce the burden on your estate but careful planning is needed before implementing any longer-term strategy to make sure that your own position is not compromised.
- Long-term Tax Planning – Given the changes in CGT rates, it is worth reviewing your investment portfolio to ensure it is structured appropriately to maximise the use of the various tax allowances and minimise the tax take.
- Property Investment – If you’re planning to expand your property portfolio, factor in the increased SDLT surcharge on second homes.
By proactively addressing these changes, you might optimise your financial position and minimise tax liabilities in the coming years. Working with your financial planner can allow tailoring of these strategies to your specific situation.
Please note that this article is for informational purposes only and does not constitute financial advice.
