The Autumn Budget 2024 brings forth significant fiscal developments with varied impacts on tax allowances, pensions, and capital gains.
- The State Pension Triple Lock is upheld, with an increase by 4.1% scheduled for April 2025.
- Income tax thresholds remain frozen until 2028, continuing the fiscal drag effect.
- Capital Gains Tax rates are set to rise, with both basic and higher rates seeing significant increases.
- Inheritance tax changes are slated to incorporate inherited pensions starting 2027, impacting retirement planning.
The Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget 2024, introducing a series of financial changes with far-reaching effects. The government has reaffirmed its commitment to the State Pension Triple Lock for the duration of this parliament. This means pensions will rise by 4.1% from April 2025, aligning with earnings growth, benefiting over 12 million pensioners with an increase of up to £470 each in 2025-26.
Continuing with taxation policies, there is a notable freeze on income tax thresholds and National Insurance contributions until 2028. While this maintains current bands, it also extends the period of fiscal drag, whereby inflationary pay rises could move taxpayers into higher tax brackets without a real increase in income.
There’s a status quo on the ISA allowance, capped at £20,000 until April 2030, fostering opportunities for tax-efficient savings. This stability in ISA policy is crucial for individuals aiming to maximize their savings without additional tax burdens.
Significant changes are evident in Capital Gains Tax (CGT), where rates will increase from 10% to 18% for basic rate payers, and from 20% to 24% for higher rate payers from October 2024. Jonathan Watts-Lay emphasizes the importance of using all available allowances for tax efficiency, as the reduced CGT thresholds pose additional challenges for savers. The implementation of workplace ISAs is suggested as a way to mitigate these impacts, offering the capacity to transfer shares without tax charges, up to the £20,000 limit.
Additionally, the inheritance tax threshold remains static until 2030, but a new stipulation will include inherited pensions in inheritance tax calculations starting from 2027. This amendment necessitates careful retirement planning, where individuals must evaluate all forms of retirement income.
One aspect not addressed in the budget is the expected decrease in the stamp duty threshold, potentially affecting first-time buyers and home movers by raising the tax burdens on property purchases after March 2025.
These budgetary decisions chart a complex financial landscape impacting taxpayers, savers, and future retirees.
