The Autumn 2024 Budget, presented by Rachel Reeves in October, introduced several big changes. This will affect property investors, business owners and high-net-worth individuals across the UK. With changes to capital gains tax, inheritance tax reliefs and more, this budgets development require strategic planning to optimise tax efficiency.

1. Capital Gains Tax Planning

One of the most significant changes in the Autumn Budget was the increase in CGT rates. Effective from October 30th 2024, the basic rate for tax payers has risen from 10% to 18% and for higher tax payers has risen from 20% to 24%. You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance – this is called the Annual Exempt Amount which has remained the same at £3,000 for the 2024/25 tax year. These changes impact property investors, landlords and individuals with considerable capital investments and will call for proactive, expert planning.

How to Maximise Your Gains:

• Utilising you spouse’s CGT allowances: married couples can essentially combine their CGT exception, totaling a £6,000 exemption. However, this is reducing to £3,000 from April 6th 2025.
• ISAs and pensions: moving investments into ISAs or pensions ensures tax-free growth and eliminates CGT liability.
• Phased asset sales: distributing sales across multiple tax years allows the use of the annual exemption each year, reducing CGT impact.

2. Corporation Tax Stability and Planning

The effective corporation tax rate remains at 26.5% for companies with profits between £50,000 and £250,000. This threshold was introduced and has stayed the same since the Spring Budget inn 2023. Businesses will be able to benefit from the stability of the corporation tax rate allowing for better long-term planning.

How to Make the Most of This Stability:

• Salary VS dividend planning: review taking income from the business to optimise tax efficiency, as dividends are taxed at lower rates than salaries (see point 5 for more).
• Capital allowances: some investments like commercial property allows you to claim capital allowances to offset taxable profits, reducing your corporation tax bill.
• Pension contributions: company contributions to directors’ pensions are an allowable expense therefore reducing taxable profits.

3. Inheritance Tax (IHT) Freeze

The Autumn 2024 budget extends the freeze on the inheritance tax nil-rate band at £325,000 and the residence nil-rate band at £175,000 until April 2030. This freeze among with rising property values will essentially push more estates into the inheritance tax threshold, increasing the tax burden on future generations.

How to Minimise IHT Exposure:

• Utilise annual gifting allowances: individuals can gift up to £3,000 per year free of IHT, with additional exemptions for wedding gifts and small gifts. Regular use of these allowances can gradually reduce your taxable estate.
• Consider using trusts: trusts allow you to transfer wealth while maintaining control as well as help reduce IHT liability.
• Pensions as IHT planning tools: until April 2027, pensions are outside the scope of IHT. Contributing to a SSAS or SIPP an protect your wealth and pass assets on tax-efficiently.

4. Capital Allowances for Property Investors

The Autumn 2024 Budget didn’t make changes for capital allowances. For property investors and developers this means stability and continued opportunities to claim relief on expenditure for certain assets. The changes that were announced in the Spring Budget of March 2024 to that tax treatment of Furnished Holiday Lettings (FHLs) are still coming into effect from April 2025. These changes included the removal of capital allowances for FHL properties, aligning them with other residential property businesses.

How to Maximise Capital Allowances:

• Annual Investment Allowance (AIA): the AIA cap remains at £1 million which could be valuable to property investors and businesses investing in new assets.
• Structures and Building Allowance (SBA): the SBA allows you to claim relief on construction and renovation costs for non-residential buildings, with a deduction rate of 3% per year.
• Review and maximise your allowances: conduct a capital allowances review to ensure you claiming all available deductions on property assets.

5. Dividend Allowance Reduction: Tax-Efficient Income Extraction

The dividend allowance was previously reduced from £1,000 to £500 for the 2024/25 tax year. This change affects investors and business owners who extract income via dividends, making it crucial to reassess your approach to income extraction.

How to Adjust Your Strategy:

• Rebalance salary and dividends: given the reduction, evaluate whether increasing your salary or making pension contributions could provide better tax efficiency.
• Explore family income strategies: distribution dividends to family members that are shareholders can make full use of each individuals dividend allowance.
• Consider alternative income streams: other tax-efficient options like pension contributions or ISA investment can reduce reliance on dividends for income.

6. Pension Contributions

Pension contributions remain one of the most tax-efficient ways to save for retirement. The annual allowance is set at £60,000 for 2024/25 which provides valuable tax relief for high-income earners and business owners, especially those seeking to reduce taxable profits. However, one major change from the budget is the inclusion of pensions in Inheritance Tax (IHT) from April 20727. It is crucial to reassess your pension strategy to minimise future tax liabilities on estate planning.

Maximising Your Pension Strategy:

• Company contributions: business owners can reduce their corporation tax liability by making pension contributions through the company.
• Review beneficiary nominations: with pensions being included in the IHT calculation from 2027, ensuring your beneficiaries align with your estate planning goals is vital.
• SSAS pensions for property investors: offers flexibility for property investments, enable tax-efficient investment in commercial property.

Conclusion

The Autumn 2024 UK Budget introduced several new changes with significant implications for both individuals and businesses. Proactive planning and informed decision-making with expert advice to help navigate these developers is crucial now more than ever.

If you’re looking to optimise your finances in light of the Autumn 2024 Budget and make the most of the new tax landscape, get in touch with Goldhouse Accounting. Our specialists can help you develop a tax strategy tailored to your unique needs. As well as ensuring you maximise savings and make the most of every opportunity.

If you have any questions, you can contact a member of the team. Or in the meantime, check out our free resources including our guides and other blog posts. For more from us, visit our social media channels.