Comments from Saffery Partners on the UK’s 2024 Autumn Budget

Following the Autumn Budget announcements on 30 October, Saffery partners comment on the implications of the Chancellor’s tax changes:

Lizzie Murray, partner and head of the Private Wealth Practice Group at Saffery, comments:

“Rumours had suggested the Chancellor was scaling back the government’s more ambitious proposals to raise taxes on the wealthy. Today shows why you shouldn’t take heed of rumours.

“Though many of her policies could theoretically have gone further – like fully aligning CGT rates with Income Tax rates as some had postulated – this will be of little consolation to wealthy individuals facing up to significantly higher taxes, in some cases from tomorrow.

“The increases to the Business Assets Disposal Relief rate to 18% by 2026 will bring it in line with the new lower CGT rate, and only 6% below the main rate, effectively phasing out this essential relief for incentivising the UK’s wealth creators. It’s hard not to view this as contradictory to the government’s stated ambition for the UK to be a global hub for start-up businesses particularly in tech and AI.”

“It is understandable that the Chancellor decided not to further extend the freeze on Income Tax thresholds beyond 2028. The freeze is already a leading cause of the current record-high tax burden through fiscal drag. With the proportion of taxpayers paying the higher rates of tax increasing by 28% in the past four years alone, it is frankly hard to imagine how the current thresholds could be sustainable up to the end of the decade. The higher rate would essentially become the standard rate.”

“The Chancellor sought to frame her reforms to IHT as a balanced approach showing understanding of the noble desire people have to pass their wealth onto their descendants. Yet it is striking that her package of reforms, including removing the IHT protections for pensions from April 2027, is expected to bring in an additional £2bn per year, given that the total currently raised by IHT is around £7bn. This equates to almost a30% increase in one fell swoop. With the nil rate band and residence nil rate band unchanged, along with spousal exemption, this higher IHT burden will no doubt continue to fall on only a very small number of estates.”

Richard Jameson, partner at Saffery, comments:

“The changes to BPR could have a wide-ranging impact. BPR is more valuable than APR according to HMRC statistics and the amount of BPR claimed is more skewed by larger value claims – i.e. assets over £5m – than APR.  Family businesses and unlisted trading businesses historically will have relied on BPR to allow an orderly succession. From April 2026, these businesses now find themselves in the Chancellor’s crosshairs. Now faced with a 20% IHT charge (above £1m of value) on the death of the elder generation, those business owners will be worried as to how IHT liabilities will be funded – will the business need to be sold or broken up or will the business owners have to take on debt to fund the tax? These changes should encourage more lifetime succession of businesses.

“The increase in the carried interest capital gains tax rate from 28% to 32% is more modest than feared, but carried interest will be taxed as deemed trading profits and liable to income tax and national insurance from 6 April 2026. The amount which is taxable as income is expected to be 72.5% of the total receipts which could give an effective tax rate of up to approximately 34% from April 2026. However, the definition of what constitutes carried interest is due to be reformed from April 2026, which is expected to be a more fundamental change for the private equity sector.”

Steven Coelho, partner at Saffery, comments:

“The uncertainty surrounding the abolition of the non-domiciled regime has come to an end. By extending the scope to the temporary repatriation facility which will now be a three-year regime, at a rate of 12% for 2025-26 and 2026-27, increasing to 15% for 2027-28, and to include matched capital payments from offshore structures, this will be considered by many taxpayers to be a bittersweet provision given the wider announcements made to this policy. 

 “Despite the recent announcements in the media, and studies by the Institute of Fiscal Studies, the Chancellor has indeed stuck to her manifesto promise and has abolished the protected settlement provisions and considerably limited the grandfathering on IHT in relation to assets held in trust to the Gift with Reservation of Benefit provisions.

 “The overarching concern, as voiced by the professional bodies, relates to the scope of extending IHT to excluded property held in an offshore trust. The draft legislation and announcement today suggests that, although assets in trust (before 30 October 2024) may be excluded from the Gift with Reservation Benefit anti-avoidance provisions, the full assets held in trust will still be assessable to tax on the Trustees on each and every chargeable event (including 10 year anniversaries and on capital distributions), where the settlor meets the relevant long-term residence condition (i.e. being UK tax resident for 10 of the previous 20 tax years immediately before the chargeable event).  These announcements may still lead to a mass exodus of wealthy non-dom taxpayers as has been predicted in various studies.

Alexandra Britton-Davis, partner at Saffery, comments:

“The replacement of the remittance basis with the 4-year FIG regime was heralded as a simplification of the current system. However, the reporting requirements for making a claim mean this is anything but. Taxpayers will need to make separate claims for relief from tax for foreign income, foreign capital gains and overseas workdays relief. Moreover, they will need to quantify the income/gains being relieved and any unquantified income/gains will remain within the scope of taxation. Coupled with a reduced deadline for making a claim – reduced from 4 years to 22 months – the scope for unexpected tax charges arising from genuine errors will undoubtedly increase.”

You can read the full Saffery analysis of the Budget announcements here.