Note:

This is a summary of today’s Budget speech by the Chancellor. It is not meant to be a comprehensive overview of everything announced. It is designed to only highlight the points we feel would be of main interest to our clients. Also, it is possible that further details will emerge from the full Budget text over the coming days, that were not announced today.

Pensions:

There was a huge amount of speculation about pension taxation before the Budget. Fears around the possible reduction of the amount that a person can draw down as Pension Commencement Lump Sum (PCLS) (Tax-free cash for us older people) and higher rate tax relief on pension contributions, proved to be unfounded. These were left alone, as was the lifetime and annual allowances.
However, the one area of pension taxation that did not escape the Chancellor’s attention was Inheritance Tax (IHT):
• From April 2027 all inherited pensions will be subject to IHT (currently 40%).
Historically, inherited pensions that were in excess of the Lifetime Allowance were liable to tax of up to 55%, prior to 2015.

Overall pensions might appear to have got off lightly, but the inclusion of most forms of pension benefits in ones estate for inheritance tax is going to have a very big effect on clients, future plans will need careful consideration once this new legislation takes effect in April 2027. The devil will be in the detail and the legislation might change from what is proposed, needless to say we will keep ourselves abreast as the changes develop so that we can advise our clients accordingly.

Capital Gains Tax (CGT):

Before the Budget, it was widely speculated in the media that CGT rates would be harmonised with income tax rates i.e. 20, 40 & 45%. Rates have gone up, but far less than expected:

• From today basic rate CGT will increase from 10% to 18% and higher rate CGT from 20% to 24%.
• Personal CGT allowances unchanged.
• Business asset disposal relief limit remains the same at £1milion, however the CGT rate will increase from 10% to 14% from April 2025 and then to 18% from April 2026.

Inheritance Tax (IHT):

Apart from the change to pensions noted above, there were no changes announced to the general IHT rates or allowances. However, the current allowance will stay frozen for an extra 2 years until 2030. There were changes to Business Property Relief (BPR):
• Businesses and farms with assets over £1 million will be subject to 20% IHT from April 2026

National Insurance (NI):

As promised there was no direct increase for employees. However, as widely expected there was increases to employers NI contributions:
• 1.2% increase to 15% from April 2025.
• Threshold reduced from £9,100 to £5,000, with reprieve for small businesses – threshold increased to £10,500.

Other Changes:

• The State Pension will increase by 4.1% from April 2025, in line with average earnings growth.
• Increase to carers allowance. A carer can earn £10k without losing benefits, from April 2025.
• No change to Fuel Duty.
• Air passenger duty will increase – up to £2 for short hall.
• Alcohol duty rates on draught products will reduce by 1.7%.
• Alcohol duty rates on non-draught products will increase in line with RPI from February 2025.
• Stamp Duty surcharge for buying second homes increased by 2% to 5%, from tomorrow.
• Potholes – £500 million increase in road maintenance budget – 1million extra potholes filled
• Bus fare cap increased to £3.
• As widely expected, VAT will be charged on private school fees from April 2025 and Business Rate Relief will also be removed.
• Against speculation, there was no extension to the frozen Income Tax thresholds. They will increase with RPI from April 2028.
• The London link of HS2 to Euston will now go ahead.
• Oil and Gas levy increase to 38% to March 2030.
• Non-Domiciliated tax regime – domicile framework removed from April 2025.

The above is our understanding of what was announced today, but we cannot be responsible for its completeness or accuracy.

If you wish to discuss the impact of any changes to your personal arrangements, please contact your usual adviser.