After a long wait and much media and industry speculation, the Labour Chancellor, Rachel Reeves finally delivered her 2024 Autumn Budget on 30 October.
You may have read our Budget update that we published shortly after Reeves delivered the Budget, which gave a high-level overview of the main changes announced.
If you’re an Australian living in the UK, there are likely to be issues arising from the Budget that affect you.
So, now read more about some of the key announcements, and how they could affect you and your financial planning.
1. Your pension assets will no longer be exempt from Inheritance Tax
Arguably the most impactful change from a financial planning perspective concerned pensions and Inheritance Tax (IHT).
At present, your accrued pension fund will not normally form part of your estate for IHT purposes.
However, the Chancellor confirmed that from April 2027 this will no longer be the case. Your pension assets, plus the value of any pension death in service arrangement, will be added to the total value of other assets in the estate and will be taxed in the same way.
So, if you have been using your pension fund as part of your estate planning arrangements with a view to tax-efficiently passing assets to your beneficiaries, this will no longer be possible from April 2027.
This is likely to affect both your estate planning and retirement income strategy, especially if you have a large pension fund and substantial other assets.
As a result, we would recommend that you get expert advice and review your legacy arrangements.
2. You might pay more tax on your investment profits
Any profits you make from your investments that aren’t held in a tax-efficient option such as an ISA could be liable for Capital Gains Tax (CGT).
There was a lot of speculation before the Budget that the Chancellor would look to align CGT rates with Income Tax, in much the same way as this is charged in Australia.
Instead, in her speech, Rachel Reeves increased the basic rate of CGT from 10% to 18%, and the higher rate from 20% to 24%.
The rates of CGT payable on the sale of any property that isn’t your main residence remain unchanged at 18% and 24%, respectively.
3. There will be no change to ISA contribution limits until at least 2030
The increases to the rates of CGT, along with the gradual reduction in your CGT Annual Exempt Amount from £12,000 to £3,000 since 2022, make General Investment Accounts (GIA) a potentially less attractive investment option than they previously may have been.
They also make it all the more important to make the most of the tax-efficient options that are still available, such as ISAs, where any investment gains you generate are free of CGT.
In this regard, there was some good news in the Budget as the chancellor confirmed that the current ISA annual subscription limit will remain at £20,000 until at least 5 April 2030.
This provides some valuable long-term reassurance for savers and investors. Remember that the £20,000 limit applies to all individuals over the age of 18, so a couple can tax-efficiently save £40,000 each year.
4. The freeze on Income Tax thresholds will end in 2028
Some more welcome good news in the Budget was confirmation that Income Tax thresholds will start to increase in line with inflation from 2028.
The thresholds were originally frozen by the previous government in 2021, with the freeze to 2028 being confirmed a year later.
Breaking the link between the thresholds and inflation was effectively a stealth tax, as more of your salary could become subject to higher rates of tax as your earnings increase each year.
So, the reinstatement of the link is welcome news, even though it won’t come into effect until 2028.
5. The Stamp Duty payable on additional properties has increased
If you have an active buy-to-let (BTL) property portfolio, or you are simply thinking of buying a second property in the UK, you are likely to be affected by an increase in the Stamp Duty Land Tax (SDLT) surcharge.
The Chancellor confirmed that, with effect from 31 October 2024, the SDLT surcharge on the purchase of second homes, and BTL residential properties, increased from 3% to 5%.
Not only does this mean an increase in your costs if you are buying an additional property, but the charge also applies if you are living abroad and purchasing property in the UK.
6. Changes were announced to the taxation of non-UK domiciled individuals
If you currently hold non-domicile status and have non-UK assets or foreign income and gains, you are likely to be affected by changes to the taxation of non-doms announced in the Budget.
From 6 April 2025 a new tax regime will apply based on residence rather than the current remittance basis that is subject to domicile.
This will mean that if you are a new arrival in the UK you will be eligible for full relief on any foreign income and gains for the first four years of your tax residency.
Note, however, that you must not have been a UK tax resident in any of the 10 consecutive years prior to your arrival.
If you feel you may be affected by these changes, we would recommend you get expert advice with regard to how to manage your status to mitigate taxation.
Get in touch
If you would like to discuss your financial planning arrangements, or are concerned about how any Budget changes could affect you, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and legislation, which is subject to change.
