The key tax changes from the Autumn Budget

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There was a lot of speculation about significant tax changes in the lead-up to the Autumn Budget, but was it all much ado about nothing?

While we were pleased to see that many of the rumoured changes did not surface in the Budget announcement, we have observed a trend of increasing tax rates and growing complexity around pensions over the last few years. This trend makes it critical for families to seriously consider their estate planning arrangements, especially those looking to leave an inheritance for their children and grandchildren.

In this article, we have highlighted the most significant tax changes from the Budget that families should be aware of. For a more detailed summary, please watch our video, where partners Rachel Winter (Investment Manager), Will Stevens (Head of Financial Planning), and Shaun Robson (Head of Wealth Planning) discuss what these changes mean for families.

Stamp Duty for second homes has risen

 The Stamp Duty Land Tax surcharge for second homes has increased from 3% to 5%, with the change implemented on 31st October 2024. This change means that individuals and families buying second homes or buy-to-let properties will see a significant increase in taxation.

Capital Gains Tax rates have risen

Rumours about Capital Gains Tax (CGT) in the run-up to the Budget reported that tax rates could go as high as Income Tax rates. In reality, we saw an increase in the lower and higher rates of CGT to 18% and 24%, which brings the lower rate in line with, and the higher rate almost equal to, the tax due on the sale of second homes (18% and 28%).

Pensions to form part of the estate from 2027

In possibly the most significant change to pension legislation for over a decade, the Chancellor announced she will reintroduce Inheritance Tax on pensions from April 2027. As a result, many individuals will need to consider whether to draw on pension income during their lifetime. Individuals may also wish to consider their investment approach, as investors have historically used pensions to pass wealth down to family members instead of providing income through retirement.

Tax relief on AIM-qualifying investments has decreased

Individuals may also wish to reconsider whether they hold AIM-qualifying investments in their portfolio, as historically there was no IHT to pay on these assets if they were held on death and had been held for two years. That relief will halve from April 2026, so only 50% of the qualifying investments will be exempt and the effective rate of IHT due on those assets will now be 20%.

Contribution allowances unchanged for pensions and ISAs

In better news for savers and investors, pensions and ISAs remain broadly untouched except for the IHT implications noted above. The contribution levels of £60,000 a year for pensions and £20,000 a year for ISAs have remained frozen and will do so throughout this government.

Further good news includes that no lifetime allowances were introduced on ISAs or pensions and the scheme that allows for investment into Venture Capital Trusts and Enterprise Investment Schemes was extended out to 2035.

More ways we can help with family finances

 While the impact of the changes announced in the Autumn Budget may be less significant than the speculation had suggested, the announcement demonstrated an ongoing trend of shrinking tax-free allowances and additional complexity around pension management. As pensions often form part of wealth transfer plans, it is now even more critical to consider the implications these tax changes could have.

Whether you are seeking assistance with saving and investing for your family, arranging your finances in a more tax-efficient manner or transferring wealth to the next generation, we have a team of experts, who specialise in a broad range of financial areas, including investment management, wealth planning, tax, trusts, wills, lasting power of attorney and more.

To learn more about how we can help you to save, plan and invest to meet the financial goals you have for your family, please drop into House of Killik Chiswick for a complimentary chat or email chiswick@killik.com.

Please be aware that as with all investments, your capital is at risk and you may not receive back the same amount that you invest. Please note that tax treatments depend on personal circumstances and the rules may be subject to future change.

If you have any questions about this article, or wish to discuss your financial circumstances, please do not hesitate to contact Relationship Manager, Phil Sole and House & Community Coordinator, Emma Walker.

We welcome all Chiswick residents to House of Killik, no appointment necessary.  Pop in for a chat and a coffee at 13 Devonshire Road – we look forward to meeting you soon.