Following the recent Budget announcement, we are pleased to share with you a recording of our post Budget webinar and a concise summary of the key changes and solutions that may impact your financial planning. Please feel free to share this with friends, family, and colleagues if you believe it will be useful to them.
You can watch the webinar recording here.
Our team at Mattioli Woods is here to help you navigate these updates and ensure your financial strategies remain robust and effective.
Capital gains tax (CGT) changes:
- Increased rates: Basic-rate taxpayers have seen CGT rise from 10% to 18%, and higher-rate taxpayers from 20% to 24%. For disposals that qualify for Business Asset Disposal Relief (BADR) CGT will increase from 10% to 14% in April 2025 and to 18% in April 2026, subject to a lifetime limit of £1 million.
- Unchanged allowances: The CGT exemption remains at £3,000 per person per tax year, with no changes to spousal transfers or ISA allowances.
Impact and considerations:
- Investment structures: Higher CGT rates may affect shares held within taxable portfolios, impacting overall returns.
- ISA utilisation: Consider maximising your annual ISA allowance of £20,000 per person to mitigate the impact of CGT and income tax.
- Spousal transfers: Review spousal transfers to optimise allowances where appropriate.
- Staggered sales: If you were looking to sell shares in a taxable portfolio, consider staggering sales subject to CGT before and after April to maximise the £3,000 CGT annual exemption.
Inheritance tax (IHT) updates:
- Current position: IHT remains at 40% on estates, with exemptions for spouses and charities, and various gifting allowances unchanged.
- Key allowances: The nil-rate band (NRB) at £325,000 and residence nil-rate band (RNRB) at £175,000 per individual remain unchanged until April 2030.
- Changes from April 2026: Combined full relief of up to £1 million per taxpayer for Business Property Relief (BPR) and Agricultural Property Relief (APR), with 50% relief thereafter. Whereas, BPR will reduce from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.
Pensions to be subject to IHT from April 2027: The majority of pensions will become part of an individual’s estate for IHT. Whilst under consultation for how these changes would be implemented, this change, if proceeds as planned, will both increase the scope of those estates subject to Inheritance tax, as well as leaving a direct IHT liability on pension scheme assets. This will also potentially impact the RNRB for estates over £2 million, including pension assets.
Planning considerations:
- Estate management: Review and update wills, consider trust planning, and explore insurance options.
- Pensions: Ensure your expression of wish forms are up to date with considerations of how the pension should pass upon death pre and post April 2027 and consider tax-efficient income planning strategies.
Next steps
We appreciate there are many changes and things to consider. Our teams are ready to assist you in reviewing your current financial plans and making any necessary adjustments. Please do not hesitate to contact your consultant to book a meeting in the diary.
Thank you for trusting Mattioli Woods with your financial planning needs. As always, we are here to help navigate you through any changes and provide you and your family with clarity and peace of mind.
This article has been written by Wealth Management Consultant, Nathan Smith.
All content correct at time of writing (November 2024).
