Labour’s first fiscal event in 14 years makes bold changes that will affect higher earners across the country, with a ‘sustained increase in spending, taxation and borrowing’ according to the Office for Budget Responsibility. Russell Brett explains what the Budget means for you, from fundamental pension reforms to CGT increases.

Investing for growth – at the expense of wealthy investors? Chancellor Rachel Reeves’ first Budget dealt employers a series of blows in her bid to plug an estimated £40 billion black hole in public finances, so whilst employee payslips effectively remain untouched – the majority of High Net Worth Individuals (HNWIs) should be mindful of these five core takeaways: 

  • Inheritance Tax now applies to unspent pension pots, 
  • British ISA plans are scrapped
  • Estate planning changes, including exemptions to agricultural assets under Inheritance Tax, are reduced, 
  • Capital Gains Tax has now increased (though arguably less than anticipated)
  • National Insurance contributions will rise.

You’ve heard the doom and gloom—now let’s explore the opportunities and what this means for you.  

Pensions: what’s changed? And what hasn’t?

Something that will be of concern to those currently in or approaching retirement will be the impending changes to pensions. 

The Chancellor has announced that unspent pension pots from those aged 75 or over upon their death will now be subject to Inheritance Tax. While under the current rules, funds obtained in this way are still subject to income tax, from April 2027, you could lose up to 40% of the assets bequeathed to you due to IHT—the rates of which are frozen until 2030, when they will most likely be reviewed.

While pensions had previously been a convenient vehicle for leaving tax-free sums to loved ones for the next generation, the change essentially means that using pension funds as a tax-efficient transfer of wealth to the next generation will be a thing of the past.

It seems that pensions are returning to their original purpose – to fund a comfortable retirement. This means that the tax allowances, reliefs and general efficiencies whilst you are alive remain in place. That said, we’ll likely see a fundamental shift in how people approach pensions from April 2027 when this kicks in – which means that many people will need to rethink how they see asset drawdown.

Plans for the British ISA have been scrapped.

Those pondering the British ISA’s viability as a new tax-efficient investment tool need no longer be perplexed by the unconfirmed savings vehicle – as it has officially been consigned to the scrap heap.

Instead, existing ISA rules remain in place  – which means that:

The above rules have been etched into stone, it seems – until at least 5th April 2030, when the treasury is expected to crack out the chisel yet again.

Estate planning changes: Agricultural assets will lose vital exemptions.

The inheritance tax nil-rate bands are already set at current levels until 5th April 2028 and will stay fixed at these levels for a further two years until 5th April 2030. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million. Qualifying estates can continue to pass on up to £500,000 per individual, and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.

The good news is that this vital tenet of wealth transfer remains untouched; the Inheritance Tax thresholds have been frozen for two more years until 2030. However, now would be an ideal time to speak to your wealth adviser to ensure that your Inheritance Tax liabilities (and indeed, IHT Insurance) are as tax-efficient as possible in the shifting fiscal and economic climate.

Those with investments in agricultural assets will need to look more closely at your wealth distribution in this area. This is because the Autumn Budget included a reform of the Agricultural Property Relief and Business Property Relief  – effective from April 2026.  Instead of the blanket nil-rate bands and exemptions, the 100% rate of relief will serve only for the first £1 million of combined agricultural and business assets – after this cut-off point, and assets will be subject to 50% Inheritance Tax, i.e. an assumed rate of 20% on these assets,

However, the tax changes that are likely to be the most impactful to savvy investors will be the changes to Capital Gains Tax – which are now already in place.

Capital Gains Tax increases to 24% 

Until midnight on 30th October 2024, the lower rate of Capital Gains Tax that applied to residential property was 10%, and the higher rate stood at double that: 20%. The lower and higher main rates of CGT have now risen to 18% and 24%, respectively – and this is already in place retroactively for disposals made on or after the (now passed) deadline.

It’s also vital to note that the rate for Business Asset Disposal Relief and Investors’ Relief will increase from 10% to 14% from 6 April 2025 and will increase again to match the lower main rate at 18% from 6 April 2026. The new rates will be legislated in Finance Bill 2024-25, which we will explore in detail once released.

The government is supporting first-time and main home buyers, having increased the Higher Rates for Additional Dwellings of Stamp Duty Land Tax from 3% to 5% on 31 October 2024. These higher rates now apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential. Those who exchanged contracts prior to 31 October 2024 are not affected by this rate increase.

Employer National Insurance increases by 1.2%

The most significant change that will undoubtedly impact most businesses is the increase in National Insurance Contributions. Whereas they have previously been 13.8%, they increased to 15% on 6th April 2025. The Secondary Threshold is the point at which employers become liable to pay NICs on employees’ earnings and is currently set at £9,100 a year. The government reduced the secondary threshold to £5,000 a year from 6th April 2025 until 6th April 2028, after which they will increase it by using the Consumer Price Index (CPI) thereafter. This will ensure that most companies’ most significant expense (their workforce) has just become much more costly.

This is an onerous undertaking for employers – but the good news is that National Insurance taxation for employees remains unchanged. You can read more about the current NI rates for employees here.

Feeling uncertain? Seek expert advice

If you’re an investor, a property owner, or a concerned retiree looking to safeguard their wealth in a tax-efficient manner, now is the time to seek expert support from the “Best Financial Advice firm in The East of England”. Contact one of our advisers today to ensure that you budget for these critical tax changes.