UK Autumn Budget 2024: what are the key watchouts for financial advisers?

When is the Autumn Budget 2024?

The Autumn Budget 2024 date is set for 30 October, and financial advisers must stay informed about upcoming changes that could impact their clients.

As it approaches, the financial landscape is set for significant changes. 

The Chancellor of the Exchequer, Rachel Reeves, is at the helm, and a black hole in public spending is looming over her plans. 

She must make some difficult decisions, and she faces pressure to address the nation’s finances while balancing the needs of citizens and the economy. 

What’s changing with the Autumn Budget 2024?

The 2024 Autumn Budget is anticipated to bring various adjustments to taxation and financial regulations that will affect both advisers and their clients. 

Here’s a breakdown of the key areas expected to see changes:

1. Capital gains tax (CGT)

One of the most talked-about changes is the potential adjustment to capital gains tax. 

Prime Minister Keir Starmer's assertion that "those with the broadest shoulders should bear the heavier burden" emphasises a focus on wealthy taxpayers. 

CGT generated £16.9 billion in 2022/23, but aligning its rates with income tax could add high single-digit billions annually. Currently, the highest CGT rate is 28% on gains from 'carried interest' if you manage an investment fund. According to The Guardian, rates of 33% to 39% are being tested ahead of the Budget announcement.

Financial advisers should prepare clients for potential changes that may impact asset sales, particularly regarding investments and second homes.

2. Pension tax relief

There is speculation that the upcoming 2024 Autumn Budget may introduce a flat rate of pension tax relief. The figures currently being bandied around are 25% or 30%.

The current system benefits higher earners significantly more than basic rate taxpayers, prompting discussions about a fairer approach. A flat rate could provide additional encouragement for lower earners to contribute to their pensions, aligning with the government's goal to stimulate economic growth. 

This potential change, alongside the potential cap on the tax-free lump sum, means pensions are one of the most anticipated topics of the Chancellor’s speech.

Financial advisers must understand these potential changes. Clients should be prepared to discuss the implications of any adjustments to pension tax relief, especially as government priorities shift in response to economic pressures. 

3. Stamp duty

Labour’s pre-election manifesto included a policy to increase Stamp Duty on residential property purchases by non-UK residents by 1%. 

This measure aims to address concerns about housing affordability and the influence of foreign investment in the UK property market. The potential rise, if implemented, would add to existing Stamp Duty surcharges for overseas buyers, making it more expensive for non-UK residents to invest in UK property. 

Additionally, calls have been made for the Chancellor to maintain the current first-time buyer Stamp Duty threshold of £425,000, which is set to fall back to £300,000 on 1 April 2025.

For financial advisers, particularly those working with first-time buyers or clients involved in property investments or overseas buyers, this anticipated change is important to monitor. Advisers will need to consider its impact on property portfolios and tax planning strategies as further details emerge.

4. Inheritance tax (IHT)

IHT is one of the most likely candidates for reform in the 2024 Autumn Budget. While it has long been perceived as a tax on the wealthy, rising property prices mean more families are being drawn into its net. Latest HMRC statistics show that only around 4% of estates pay IHT, but this could change if the Chancellor decides to alter the rules.

The Labour manifesto suggests potential changes could include lowering the £325,000 nil-rate band threshold, which has been frozen since 2009, or reforming the residence nil-rate band.

Additionally, the Chancellor may choose to tighten the rules around gifts and trusts to raise further revenue.

For financial advisers, these potential changes could lead to greater demand for estate planning services. Advisers will need to stay informed and ready to guide clients through possible adjustments to thresholds, gift rules, and exemptions as they emerge.

5. Corporation tax

In a recent address to Parliament, Chancellor Rachel Reeves confirmed that the government will cap corporation tax at 25% for the remainder of this Parliament. 

Reeves also reiterated the government's commitment to maintaining full expensing, a policy that enables companies to fully deduct investment costs from taxable profits.

This measure, which encourages capital investment, will be particularly important for businesses looking to modernise or expand operations. By offering a clearer tax roadmap, the government hopes to foster long-term business growth and boost the economy. 

Financial advisers should consider how the cap and expensing policies can benefit corporate clients, particularly in tax planning strategies that focus on maximising investment and capital expenditures while minimising tax liabilities.

6. Council tax

The current council tax system is criticised for being outdated and unfair. With significant disparities in property value increases, many households find themselves in the ‘wrong band.’

While Labour has previously said it would not change the banding of council tax, there has been talk of the government replacing the system entirely with a 0.5% tax on property values. This could generate additional revenue for local services but might also face pushback, particularly from those in high-value areas. 

As reforms are speculated, financial advisers should prepare clients for potential changes to council tax bills in the upcoming budget.

7. Economic forecast from the Office for Budget Responsibility

The Office for Budget Responsibility (OBR) provides independent analysis and forecasts, helping to assess the fiscal outlook and associated risks. 

In the upcoming 2024 Autumn Budget, the OBR will deliver its analysis of the state of public finances, providing an updated forecast on debt, growth, and public spending. 

It is likely to continue highlighting the growing debt burden, which, according to its most recent projections, could reach 274% of GDP over the next 50 years without fiscal intervention. 

Financial advisers should monitor the OBR’s assessment closely, as its forecasts often inform significant fiscal policy changes that can directly affect clients' long-term financial planning and investment decisions.

How to prepare for the Autumn Budget 2024

Financial advisers can take several proactive steps to prepare for the Autumn Budget:

• Stay informed: Review updates from reliable financial news sources and the government regularly. Understanding the implications of proposed changes will equip you to provide the best advice to your clients.
• Evaluate client portfolios: Begin reviewing client investments and financial strategies in light of potential changes. Consider how adjustments in tax regulations may impact their financial positions and plans.
• Communicate with clients: Open a dialogue with your clients about potential changes in tax laws. Ensure they understand the implications and prepare them for any necessary adjustments to their financial strategies.
• Update financial plans: Based on the announcements in the Autumn Budget, be ready to update financial plans accordingly. This may include revising tax strategies, investment approaches, and estate plans.

Want to work with Unbiased? 

With the Autumn Budget 2024 just around the corner, it’s more important than ever for financial advisers to stay on top of potential changes. 

Advisers can help clients smoothly navigate the shifting financial landscape by keeping them informed, reviewing their portfolios, and adjusting strategies where needed. 

Staying proactive now will ensure clients are ready for whatever updates the Chancellor announces.

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