2024 Budget takeaways:
The right time to achieve the best tax position possible
As expected, the October 2024 Budget delivered significant changes to Inheritance Tax (IHT), Capital Gains Tax (CGT), and Corporation Tax (CT), shifting the tax landscape in ways that could impact individuals, businesses, and investors alike. Saving tax for business owners and their families is our business and we are here to help you navigate the new terrain and make the most of the tax-planning opportunities for business owners available in the UK
1. Inheritance Tax (IHT): Targeted Reliefs and Tighter Thresholds
In a widely anticipated move, the government has addressed IHT in their statement, aiming to reassure families regarding their tax burden, whilst recognising certain relief loopholes. Here’s what we know:
- Nil-Rate Band: the Inheritance Tax nil-rate bands are already set at current levels until 5 April 2028, with legislation fixing these levels for a further 2 years until 5 April 2030.
- nil-rate band will remain at £325,000
- residence nil-rate band will remain at £175,000
- residence nil-rate band taper will continue to start at £2 million
- Tapered Relief Adjustments: Estates with higher values will see changes in tapered relief on the residence nil-rate band, reducing the benefits for estates exceeding £2 million. This change signals the government’s intent to moderate wealth transfer taxation, particularly on larger estates. It is essential to implement tax-planning measures to optimise your tax position for inheritance purposes as early as possible. A Lifetime Business Tax Plan can offer the control and flexibility to continue to grow your legacy and ensure your hard work is not lost, due to poor forecasting and tax liability.
- Review of Business Property Relief: Reliefs will be reformed from April 2026. Some changes to Business Property Relief (BPR) mean that business owners need to review their estate planning strategies carefully. With a narrowed scope for BPR, certain categories of assets may no longer be eligible, creating a potential tax exposure that was previously sheltered. This again, needs addressing with a robust tax plan and it is wise to leverage the advice of experts.
These adjustments make it essential to reassess estate planning strategies to ensure that new thresholds and relief criteria are optimally utilised. Families may benefit from revisiting their wills, especially those with larger estates, as well as taking advantage of lifetime tax planning, accounting for the new limits, existing criteria and by understanding what is available to them.
2. Capital Gains Tax (CGT): A Higher Rate with New Incentives for Long-Term Investment
Changes in CGT were a focal point in the Budget, with the Chancellor introducing both increases and incentives aimed at encouraging long-term investments. Notable changes include:
- Increased CGT Rates: the main rates of Capital Gains Tax that apply to assets other than residential property and carried interest, have increased from 10% and 20%, to 18% and 24% respectively for disposals made on or after 30 October 2024. This impacts those with substantial investment portfolios, rental properties, or assets with significant capital gains. Therefore, it is essential a Lifetime Business Tax Plan (LBTP) is put in place to minimise this liability. A LBTP combines powerful tax-planning products that work right across your financial situation, hoovering in each element of tax responsibility and ensuring the strategy is working to keep the liability to a minimum, within HMRC rules.
- Long-Term Investment Relief: A new relief mechanism has been introduced for long-term assets that are held. This relief is intended to support long-term investment behaviour and incentivise individuals to retain assets for extended periods, aligning with broader economic stability goals. As part of your tax-planning strategy, long-term goals can be targeted and achieved.
- Changes to the Annual Exemption: The current annual exemption of £3000 further underscores the need for individuals to manage disposals carefully and consider tax-efficient wrappers and strategies, such as the Small Self-Administered Scheme, Family Investment Company and the combined Lifetime Business Tax Plan, for investments and growth, whenever possible.
These adjustments make effective tax planning more important than ever. Investors, particularly those with substantial capital gains, may need to consider various options for legacies, handing-down assets, exploring tax-efficient investment structures, or planning for long-term holding to leverage both existing and new reliefs.
3. Corporation Tax: An Emphasis on Small Business and Innovation
Corporation Tax (CT) adjustments reflect the government’s focus on stimulating small businesses and innovation, with a mix of reliefs and rate adjustments:
- Maintained Main Rate at 25%: The main rate of Corporation Tax remains at 25% for larger businesses, signalling a stable approach for Corporate Tax at the top tier. This stability allows larger corporations to maintain long-term planning strategies without new tax rate hikes. It is essential to use this next financial period to implement a robust tax plan. The economic climate is volatile and for business owners and families without a tax plan in place, too changeable for comfort.
- Enhanced Small Business Rate: For qualifying small businesses, the Corporation Tax rate is 19%. This rate is a targeted relief for the financial year beginning April 2026, continuing to encourage small business growth, and supporting smaller firms facing rising costs and challenging economic conditions. This small advantage, coupled with a tax plan, can spearhead your business growth, and give fuel to a successful tax and growth planning strategy. Leverage expert advice to find out what this means for you and your business.
- Research and Development (R&D) Tax Reliefs: Expanded R&D tax credits have been introduced, with a focus on innovative start-ups and technology-driven sectors. This enhancement could be particularly impactful for SMEs and start-ups. Take the time to investigate all incentives that you may not even realise are out there, or available to your business. It may surprise you. Leverage the support of your accountant and other experts to learn more.
These Corporation Tax changes create new planning opportunities for businesses of all sizes. Small businesses may benefit from the reduced rate, potentially investing the tax savings back into growth initiatives and investments. Larger firms can leverage the stability in the rate to focus on other forward-looking initiatives.
There are over 1100 tax incentives and advantages available to business owners. To optimise these advantages, a tax planning strategy must be implemented, with full visibility of the incentives available to you. By combining products in a Lifetime Business Tax Plan, you can ensure long-term tax savings and the ability to take advantage of everything that is available to you, your business, and your family. IHT, CGT, CT can all be saved when leveraging the power of an integrated tax plan.
In Summary: A New Landscape of Opportunities and Considerations
The October 2024 Budget has recalibrated key tax policies, introducing significant changes to IHT, CGT, and Corporation Tax that will require close attention and, in many cases, proactive planning. For families, the IHT relief adjustments could provide benefits, but only if aligned with carefully updated estate plans. In addition, integration with business tax planning will be the key for many.
Investors face increased tax-rates, but many do not realise there are products and strategies available to help reduce this and new avenues in long-term relief. For businesses, both small and large, Corporation Tax changes offer tax stability and enviable reliefs, especially for those emphasising growth and innovation.
With these changes in mind, consider consulting with experienced business tax planning and investment experts. This will help you understand your options, reassess your approach and take advantage of the existing, and the new provisions. The post-Budget landscape offers unique possibilities, but careful planning will be essential to navigate and benefit from these tax adjustments effectively.
