Budget 2024 at a glance: Capital gains, inheritance tax, pensions, & businesses
Today, Chancellor Rachel Reeves delivered Labour’s first Budget since 2010. Prior to any public announcement, the Budget 2024 has been widely regarded as potentially the most significant in recent times.
In summary, the government is focusing on a number of tax rises intended to fund public services and stabilise the economy.
These updates reflect the Budget’s approach to taxing wealth accumulation and estate transfers. As a result, increased contributions are required from businesses, investors, and high earners.
Prior to starting, it is important to note the information below doesn’t constitute actionable financial advice. This article to here to inform you of the changes the Chancellor has announced in this Budget.
Budget 2024 summary: key changes impacting wealth & tax
Here is a short summary of the key points in today’s Budget impacting investors, businesses and those who have accumulated and are looking to preserve wealth.
Capital Gains Tax increases
Capital Gains Tax on profits from share sales rises from 10% to 18% at the basic rate and from 20% to 24% at the higher rate, impacting investors with substantial portfolios.
National Insurance for employers
From April, employers’ National Insurance will increase to 15% for salaries over £5,000, adding to business costs and government revenue.
Inheritance Tax changes
The IHT threshold freeze extends to 2030, with unspent pension pots set to be subject to IHT from 2027, impacting estate planning.
Pension policy adjustments
The previous changes to lifetime pension allowances will reduce tax advantages on large pension savings, affecting long-term wealth planning due to the above changes to IHT.
Corporation Tax & private equity tax
While the main corporation tax rate remains at 25%, taxes on private equity profits will increase to 32%, impacting investment gains in private equity.
Freeze on income tax thresholds
Although income tax rates are unchanged, thresholds will adjust only with inflation after 2028, indirectly affecting those with growing incomes as they may enter higher tax bands over time.
Watch a summary of the key points
Impacted by today’s changes? Here’s how Sterling & Law can help
If today’s Budget has left you needing to make significant changes to your current and future financial and wealth plans, here are some links to services we offer:
Alternatively, call 020 3740 5856 to request a callback with an experienced, independent financial adviser.
Budget 2024 – a breakdown
Now let’s take a look at the rest of the changes announced in today’s Budget covering:
- Personal taxes and wealth
- Business tax
- Wages benefits and pensions
- Transport and the environment
- Public spending
Changes to personal taxes and wealth
The Budget introduces several notable changes affecting personal taxation and wealth planning. Therefore, impacting capital gains, inheritance planning, and income tax allowances.
Income Tax
- No changes to current income tax rates or National Insurance (NI) paid by employees, nor to VAT.
- Income tax thresholds will increase with inflation starting in 2028, aiming to prevent “fiscal drag” where wage increases could push individuals into higher tax bands.
Capital Gains Tax
- Basic capital gains tax (CGT) on profits from share sales will increase from 10% to 18%, with the higher rate rising from 20% to 24%.
- Gains from additional property sales will retain their current rates.
- The main Capital Gains Tax rate for trustees and personal representatives is rising from 20% to 24% for disposals made on or after 30 October 2024.
- The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% for disposals on or after 6 April 2025, and then from 14% to 18% for disposals on or after 6 April 2026.
Inheritance Tax (IHT)
- The IHT threshold freeze is extended until 2030, while unspent pension pots will be subject to IHT from 2027.
- Exemptions for inheriting farmland will become more restrictive from 2026.
Business tax changes in today’s Budget
Business taxation changes were central to this year’s Budget, particularly through adjustments to National Insurance and tax treatment of private equity gains.
National Insurance for employers
- Employers’ NI will rise to 15% for salaries over £5,000 starting in April, up from the current 13.8% on earnings over £9,100, contributing an estimated £25 billion annually.
- The Employment Allowance, benefiting smaller businesses by reducing their NI liability, will increase from £5,000 to £10,500.
Corporation Tax and private equity
- The main corporation tax rate remains at 25% for profits over £250,000, while taxes on profits from private equity deals will rise to a maximum of 32%.
Wages, benefits, and pensions – what’s changed?
According to the Chancellor, today’s Budget is intends to prioritise wage growth for lower-income earners and adjustments to state benefits, designed to address the rising cost of living.
- The legal minimum wage for workers over 21 will rise from £11.44 to £12.21 per hour from April, aligning with the government’s “Plan to Make Work Pay.”
- State pension payments will rise by 4.1% next year, benefiting from the “triple lock” policy, which outpaces general working-age benefit increases.
Transport and the environment
Environmental initiatives and transport adjustments are notable in this Budget, with a continued focus on incentivising green energy and sustainable travel.
- The 5p fuel duty cut on petrol and diesel, initially scheduled to end in April 2025, will be extended for an additional year.
- New regulations include an increased Air Passenger Duty for private jet flights, and Vehicle Excise Duty for less efficient new petrol vehicles will double in the first year to promote electric vehicle uptake.
Public spending and infrastructure
Investments in public services and infrastructure remain a cornerstone of the 2024 Budget, particularly in health, education, and defence.
- NHS funding will see an additional £22.6 billion for day-to-day operations in England, with £3.1 billion set aside for infrastructure and investment.
- Education will receive £6.7 billion next year, with £1.4 billion designated for rebuilding projects across over 500 schools.
- Defence spending is set to increase by £2.9 billion to support national and international commitments.
Other changes announced in the Budget 2024
Some other additional measures address housing affordability, economic forecasting, and financial oversight.
Housing
- Social housing providers can increase rents above inflation under a new multi-year settlement.
- Stamp duty on second homes will increase from 3% to 5%, aiming to address housing affordability issues.
Economic outlook
- The Office for Budget Responsibility projects GDP growth of 1.1% this year and 2% in 2025, with inflation anticipated to drop to 2.3% by 2026.
Watch the Budget announcements in full
After reading this summary of the Budget 2024, if any of the above applies to you, you can watch the announcements in full below.
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