Budget 2024: Experts respond

 
Rosamond McDowell, Partner at Payne Hicks Beach comments on the Autumn Budget:
 

“Anyone with AIM listed stock, or for that matter other business or farming assets has been waiting with bated breath for today’s budget, expecting the absolute worst news.  The cap at £1M on relief at 100% was expected, but very few were expecting that relief on the value above that would be preserved, albeit reduced to 50%.   For those with AIM stock, confirmation that relief will apply at 50% has been a huge weight off the proverbial shoulders, with an immediately positive effect on the market in certain holdings.  It will take some time for the dust to settle and the detail to be absorbed.  I suspect the current feeling of elation will begin to dissipate, as people begin to calculate the impact for them and their businesses of a charge to inheritance tax where previously there was none. Nonetheless, it has to be said, the news could have been much worse!”

 

Changes to capital gains tax and IHT – commentary from LGT Wealth Management

 

 

AUTUMN BUDGET 2024: Reactive expert commentary from leading tax consultancy Forbes Dawson

 

Tom Minnikin, partner at Manchester tax consultancy Forbes Dawson, said:

 

On changes to employers’ National Insurance 

 

 

“Probably the worst kept secret of this Budget, it will come as no surprise to employers to find that the Chancellor has increased their National Insurance contributions.

“In their manifesto, the Labour Party said they would ‘not increase National Insurance’ and yet they have done exactly that, lifting the rate of employers’ contributions from 13.8 per cent to 15 per cent from April 6, 2025.

“Admittedly, the manifesto promise was prefaced with a reference to ‘working people’. However, some will see this as pure window-dressing, especially if it causes employers to limit wage increases at the next pay round.

“Reducing the secondary threshold – the point at which employers start to pay National Insurance on an employee’s earnings – from £9,100 to £5,000 was a surprise move. This means employers will have to pay an additional £615 in National Insurance for every employee who earns £9,100 or above.

“These changes amount to a tax on jobs and may lead businesses to reevaluate their expansion plans in light of the decision.”

 

On capital gains tax

 

 

“It comes as no surprise that Rachel Reeves has decided to increase capital gains tax, having been widely speculated in the run up to today’s Budget.

“There were fears that the Chancellor might have sought to align capital gains tax with income tax. However, Ms Reeves has opted for more modest increases, with the basic rate increasing from 10 per cent to 18 per cent and the standard rate moving from 20 per cent to 24 per cent from today.

“In making these changes, the Chancellor may have deliberately avoided the obvious ‘Halloween Horror’ headlines.

“It is likely that the government has been advised that more substantial increases would have had a disincentive effect, particularly if it led wealthy individuals to leave the UK for lower tax jurisdictions.

“Ms Reeves has probably pitched it about right in preventing a mass exodus, although there will be some for whom the changes are unpalatable.”

 

On property tax changes

 

 

“Both the Prime Minister and Chancellor had suggested ahead of this Budget that landlords would be the target of tax rises. However, Rachel Reeves has opted to largely leave property investors alone.

“There was no increase in capital gains tax on residential property gains, even though capital gains tax was increased for other types of assets. Main rates of capital gains tax have now been aligned at 18 per cent for basic rate gains and 24 per cent for higher rate gains.

“However, the Chancellor did increase the Higher Rate for Additional Dwellings in Stamp Duty Land Tax on purchases of second homes, buy-to-let residential properties, and companies purchasing residential property, from 3 per cent to 5 per cent from tomorrow.

“Property investors will dislike the increase in stamp duty, but overall they have got off fairly lightly compared to others at this Budget.”

 

On Business Asset Disposal Relief

 

“The announcement that Business Asset Disposal Relief (BADR) has been retained will come as a pleasant surprise to business owners, who had worried that the measure would be abolished at today’s Budget.

“However, the Chancellor has severely reduced the value of the relief by increasing the rate at which BADR gains are taxed from 10 per cent to 14 per cent from April 6, 2025 and then to 18 per cent from April 6, 2026. This compares to a main rate of capital gains tax of 24 per cent, which was also increased from today.

“The relief remains limited to a lifetime allowance of £1 million, meaning that by April 2026 it will only save a maximum of £60,000 in capital gains tax. For a relief which was once worth £1 million, this is now small beer.

“With the qualifying conditions also being complicated to navigate in some instances, BADR is likely to have declining importance in future.

“I would not be surprised if we see it being phased out altogether over time.”

 

On personal tax thresholds

 

 

“The decision to continue with the Conservative Party’s policy of freezing personal tax thresholds until April 2028 will come as a disappointment to many voters, who might have been hoping for an end to this stealthiest of austerity measures.

“Various income tax thresholds, including the personal allowance and basic rate band were last increased in April 2021.  Since then, figures from the Office for National Statistics show that wages have increased by over 20 per cent.  This has undoubtedly led to ‘fiscal drag’ where taxpayers are pulled into higher tax brackets as a result of pay rises.

“The Labour manifesto promised not to increase taxes on working people, but the reality is that freezing tax thresholds is a tax rise through the back door.

“The Chancellor said that thresholds will be updated in line with inflation from April 6, 2028.  It is welcome that the end is at last in sight, although taxpayers will have to endure another three and a half years of hardship before they get there.”

 

On the inheritance tax liability of pension schemes

 

Andrew Marr, managing partner at Forbes Dawson, said:

 

 

“This measure is only set to come in from 6 April 2027 and the impact is huge. An individual with a £2m pension scheme would leave his beneficiaries with an £800,000 additional IHT bill if he were to die after 6 April 2027.

“The details are currently vague because there will be a consultation but in broad terms this will involve pension administrators paying IHT over to HMRC when the scheme beneficiary dies.

“A significant benefit of making pension contributions has been the IHT shelter that pensions provide. Those individuals will feel like they have had the rug snatched from under their feet.

“It seems that beneficiaries will still have to pay income tax when they take out benefits. This means that if a 45% taxpayer inherits a £3m scheme, they will only be left with £990,000 after tax. This represents a 67% tax rate.

“For many people who feel like they have done the responsible thing by paying into pension schemes this will be a kick in the teeth.

“This is perhaps the most killing blow of the Budget to the wealthy people of Britain.

“The very wealthy may now seek to leave the UK and look for opportunities to empty their pension schemes without paying tax.

“This shows how dangerous it is to engage in very long-term tax planning, because different governments mean that taxpayers can have limited faith in the long term outcome.”

Rob Morgan, Chief Investment Analyst at Charles Stanley, comments: “A small blow to AIM and relief there’s not a knockout punch. We need a vibrant AIM market with a varied range of participants to help support these important businesses with growth capital, and a cap on relief will affect the market to a degree.”

 

Matthew Sperry, Private Wealth Partner at Katten Muchin Rosenman LLP, comments:

 

“Labour seems to have largely adopted what they had proposed previously.  This includes no grandfathering for trusts that were IHT protected, meaning foreigners resident in the UK for 10 years will be fully exposed to IHT – including those that settled trusts that were IHT exempt under current law.  I fully expect that this news will hasten the exit for many non-doms that were advised to postpone any moves until after this budget.  Labour has ignored those that have warned that this move would eviscerate the non-dom tax base.

The Labour plan makes the US even more attractive for global ultra-high net worth wealth as pre-arrival trusts can be used to eliminate exposure to US estate tax, and US income and capital gains rates are lower than the UK.  As much as I love the UK, this places the US, Italy, Switzerland, the UAE and other global jurisdictions in a much stronger position in competing for UHNW wealth and investment in the coming years.”

 

Budget: Wealthy no longer ‘captive audience’

 

Andrew McMillan, founding partner, NOVA Wealth: “When CGT was introduced in the mid-1960s, both economic mobility and public trust in government were on a different plane than today. Though the Rolling Stones famously became tax exiles in 1971 when they relocated to the South of France, their ‘business model’ required little reliance on the human capital, fundraising landscape, or legal stability that keeps many self-made people anchored here. In those days, only a small fraction of Britons held passports, and business owners largely needed to remain in-country to manage operations. Chancellors had – for the most part – a captive audience for any tax rises.

“Fast-forward six decades, and many of the UK’s wealth creators should now be seen as ‘rolling stones’ themselves – digital nomads able to manage affairs from Dubai, Portugal, or anywhere with a wi-fi connection and an attractive tax regime. For entrepreneurs planning near-term business sales, the tax savings from relocating can run into the millions, a temptation that only grows as CGT rates climb. For some, the financial advantages of relocation are becoming too tempting to ignore.

 

Joseph McLean, founding partner, NOVA Wealth: “The entrepreneurs we speak with are committed to the UK, but they are also here to solve a problem, to make the world a better place. They want to give back, but a successful entrepreneur, looking for an exit, knows the value of control. Handing millions to a government apparatus which is frequently seen to mis-allocate resources is anathema to them.

“The UK provides an incredible launchpad for many start-ups, but it doesn’t have a monopoly on the factors that allow scaling businesses to thrive…Some of those we speak to are planning to set up UK charitable foundations in lieu of the CGT they will save by moving overseas. It’s a choice shaped not by a lack of loyalty to the UK, but by the appeal of a system where they can ensure their money is doing good.

“For the government, this underlines the importance of competitive tax policies—especially now that entrepreneurs have the resources and flexibility to seek opportunities across borders if the UK becomes too costly a base.”

 

Neil Davy Chief Executive Officer of Family Business UK said: “These changes are a betrayal of Britain’s hard working family business owners and farmers that will result in valuable businesses being closed, sold and jobs lost across the country.

“For all but the very smallest companies the changes to Business Property Relief are much the same as scrapping it entirely. Far from raising money for the Exchequer our research has shown that removing the reliefs will cost money – with a £29billion cut in economic activity and 391,000 jobs lost.

“On top of changes to Employer’s National Insurance, employment rights, and living wage, this is yet another burden heaped on Britain’s 4.8 million family owned businesses, and removes entirely any incentive for starting or running a family business.

“Inheritance Tax reliefs are not a loophole. They are designed to give family businesses and farmers a level playing field to compete. The Chancellor has spoken multiple times about the importance of growth and investment but has completely failed to understand the purpose and role of these reliefs in supporting Britain’s family businesses and farms, and the risk these changes pose to her own growth agenda.”

 

 The OBR’s own analysis makes for devastating reading:

 

• Clause 3.21 shows that the Treasury will only generate 0.5billion from tax increases is to APR and BPR.
• The costings of these changes are unlikely to reach a steady state for at least 20 years.

 

Dan Moczulski, eToro comment incentivising retail investment

 

Dan Moczulski, Managing Director UK, eToro comments: “Whilst today’s Budget has been less painful than many expected, it’s still not a great day for retail investors, with a heavier tax burden on those putting their money to work in the markets, essentially disincentivising investing.

“Compared to other countries, Brits are more likely to keep their savings in cash, yet history shows that a diverse stock portfolio comfortably outperforms cash in the long run. With interest rates falling, the government should be seizing the opportunity to incentivise investment habits which help people to grow their wealth.”

 

Personal finances after the Budget: “people are still feeling under pressure financially”

 

Suzanne Homewood, MD of Decisioning at Moneyhub comments: “Both the Chancellor and the Prime Minister laid significant groundwork around the need for painful tax increases in preparation for the Autumn Budget. The good news is that their manifesto promise of no tax increases for working people has been kept, and we welcome the minimum wage boost, and the fact that there will be no extension to the freeze to income tax thresholds beyond what was already expected..

“However after years of inflationary increases, individuals’ capacity to save has decreased by 25.5% year on year according to Moneyhub’s Financial Wellness Tracker, people are still feeling under pressure financially. Our research found that 29% of people felt their financial health had worsened in the last six months with rising bills a key driver. This has led to an increase in concerning financial behaviours such as missing payments and taking on more debt.

“Businesses and financial services providers have a role to play in supporting customers that are under financial strain. Identifying vulnerability early, ensuring customers are on the most appropriate products for their circumstances and encouraging positive saving habits, will all help customers build their financial resilience and will prevent harm. But the only way to do this is by embracing more dynamic, real time financial data insights. Without utilising data to check affordability and suitability in real-time, businesses risk repeating mistakes and mis-selling products that are not suitable for customers’ circumstances, as we have just seen with car finance.

“The government’s Data Use and Access Bill offers a transformative opportunity for businesses and customers alike. With a 360-degree view of the customer, businesses are empowered to truly understand their customers’ needs and circumstances and in doing so offer highly personalised, appropriate, and fair products and services.”

 
Paresh Raja, CEO of Market Financial Solutions, said: “The Government had warned of tax rises to fill the black hole in public finances, so there was apprehension across the property and finance sectors heading into today’s Budget. Unlike previous budgets – think Kwarteng’s mini-budget – Reeves opted for a more measured approach, refraining from pulling any proverbial rabbits out of the hat – although the increase to Stamp Duty surcharge on second homes was unexpected. This approach should calm the lending and property markets, easing some of the uncertainty that has lingered in the lead-up to this announcement.

“In general, the clarity offered today is certainly welcome, though we’ll need to see how these policies translate practically. While certain regulatory and tax reforms may require careful consideration from investors and brokers alike, I anticipate the market will soon shift back to ‘business as usual’ – particularly as some of the tax increases were less substantial than many were expecting. This is promising, as the property sector has shown great resilience in recent months amid an improving economic outlook. Today’s steady fiscal approach should help maintain that positive momentum, provided that investors are able to navigate the more unexpected changes that have been made with confidence.

“Indeed, some of today’s announcements – such as the rise in Capital Gains Tax (CGT) and the Stamp Duty surcharge on second homes – will undoubtedly put a slight dampener on investors’ moods. As such, it’s up to lenders and brokers to work together to provide financial products that can help them navigate the evolving market conditions with confidence in the months ahead. The property investment landscape may have shifted, but through collaboration and innovation, there’s no reason why it can’t continue to thrive in the aftermath of today’s announcements.”
 

Pino Vallejo, CEO of Davies – Consulting, said: “As expected, it was a bumper Budget. Indeed, it was always likely to be a crucial Budget from the Chancellor, given it was the first major fiscal statement under the new Labour government – its first in 14 years. 

 

“Reeves’ speech was filled with a vast number of significant policies, reforms and spending commitments. The challenge for businesses is to take time to fully digest each element of the Budget and, in turn, understand the implications of the proposed changes; not just on their business but, crucially, on their customers. 

 

“This is especially true for financial services firms. This Budget will have a notable impact on the finances of both consumers and businesses, so the financial services industry must respond accordingly, ensuring they evolve with the political and economic climate and deliver the best possible service to customer.” 

 
Lily Megson, Policy Director at My Pension Expert, said, “Even though drastic pension tax changes didn’t materialise in today’s Budget, the damage has already been done. Weeks of speculation and rumoured sweeping reforms left savers anxious, causing many to rethink carefully planned retirement strategies. For those already wrestling with financial difficulties, this added uncertainty will have only deepened concerns about their future security.

“A confirmation of their already-pledged commitment to the triple lock and an increase in pension credit are welcome, if underwhelming. But it is not enough. The government now has an opportunity to rebuild that trust by focusing on initiatives that genuinely support savers. Finally prioritising comprehensive financial education and tools like the long-delayed pension dashboard will empower people to make informed decisions and feel confident in their retirement planning. What’s more, the second half of their pension review must deliver more than just lip service – savers need real, actionable reforms that encourage greater contributions and improve outcomes for retirement planning across the board.

“A nod to either of these engagement-boosting policies would have been a welcome announcement that could have alleviated some of the pension tax raiding fears.

“It’s now crucial that the Chancellor recognises the importance of stability and clarity in pension policy. Restoring confidence among savers will require transparent, considered policies that support long-term financial wellbeing, rather than fuelling rampant speculation that only undermines it.”
 

National Insurance:

 
Julia Turney, Partner and Head of Platform and Benefits, Barnett Waddingham: “The government’s decision to increase employer National Insurance is a difficult pill to swallow for businesses in the UK. This might turn out to be a short-sighted move which could have serious implications for employee benefits and public health.

“Many employers currently use the savings they receive from National Insurance relief to boost pension contributions or fund additional benefits like healthcare and life assurance. If these savings disappear, many employers could make the difficult decision to reduce or cut these benefits altogether.

“This is particularly concerning for healthcare benefits, such as private medical insurance. If fewer people have access to private medical insurance, this could place an additional burden on an already overstretched NHS. The Government must take more positive steps toward addressing the health crisis in collaboration with employers and insurers.”
 

Get Britain Working:

 
Julia Turney, Partner and Head of Platform and Benefits, Barnett Waddingham: “In a budget full of tricks, one possible treat for British workers is the announcement of new protections against unfair dismissal and workplace bullying, as well as better access to paternity and maternity leave. These measures demonstrate a commitment to creating safer, fairer workplaces that support the well-being and security of working families.

“Additionally, the proposed “Get Britain Working” white paper, along with initiatives to combat fraud and tax avoidance, signal the government’s intent to increase stable employment while protecting public funds. By potentially reducing strain on the benefits system, these steps aim to build a stronger, more resilient job market. However, the impact of these policies will depend on how effectively they are put into practice.”