UK Autumn Budget 2024

There is considerable speculation regarding the potential changes in the upcoming Autumn Budget. One of our managed portfolio providers, Financial Express Investments, have released a market note to explore some of the anticipated changes and possible implications for investors and markets.

Market Note - UK Autumn Budget.pdf

Download PDF • 867KB

Additionally, pension consultants Lane, Clark and Peacock (LCP) recently examined how Reeves may target the pension tax regime and argued that some changes, such as introducing ‘flat rate’ tax relief, are unlikely. This is because a significant group of beneficiaries of higher-rate relief are mid-ranking and senior public-sector workers, a group that the government is unlikely to want to alienate.

However, there are other aspects of the system which the Chancellor may consider:

1. Employer NI to be levied on employer pension contributions

2. A cap on tax-free lump sums and

3. Reducing the tax privileges of pensions on death.

Steve Webb, former pensions minister and partner at LCP said: “The Chancellor will be looking for relatively simple changes that can be introduced quickly and will raise large sums with least voter anger. Changes to taxes on business may fall within that category, and the large cost of exempting employer pension contributions from National Insurance Contributions will not have escaped the Chancellor’s attention.” However, this will be a large cost to businesses and could discourage employers from making generous pension contributions in the future.

In terms of the tax-free lump sum cap, LCP identified that whenever pension tax relief limits have been cut in this way in recent years, a system of ‘transitional protection’ has been introduced for those already over the limit or set to be so. Therefore, it is likely that a cut in the cap on lump sums would have to be accompanied by a complex system of protections, which could mean it would take months or years to implement. This would also reduce the revenue-raising potential of the measure and may mean the Chancellor decides it is not worth the political pain.

Finally, the Chancellor might look at is the rules that allow people to inherit a pension pot free of income tax where the person who died was under the age of 75. This distinction based on the age at death could be removed but is expected to raise relatively little revenue.

Our expectation is that this budget will focus more on harmonising the Capital Gains Tax regime with Income Tax and may also look to increase receipts by altering the way inheritance tax is applied. However, there is always a lot of conjecture as we approach the budget, so we look forward to the Chancellor’s plans to attempt to reignite the UK economy now that inflation appears to be under control.

As always, we encourage you to optimise your tax position by using the available allowances where possible / affordable. When legislation changes, we will always look to adapt your financial planning to ensure you are taking advantage of the products and tax reliefs available. Please do get in touch if you have any questions as we would be delighted to help.

This post contains information produced by FE Investments and opinions based on current market conditions, which we feel are relevant at the current time. This document has been prepared for general information only and is not guaranteed to be complete or accurate. It does not contain all of the information which an investor may require in order to make an investment decision.