The UK’s new government will deliver its first budget on the 30th October, 2024, and the Prime Minister has set clear expectations that people will have to “accept short-term pain for long-term good”.
Whether it be Capital Gains Tax, Inheritance Tax, Pension Relief or Stamp Duty Tax relief, our clients have been reaching out to us for guidance around the upcoming budget. In our latest Q&A, Russell Nathan, Senior Partner at HW Fisher, reveals how his clients have been reacting to the upcoming Autumn Budget.
What changes do you expect in the Autumn Budget?
In his speech on 27 August, the Prime Minister confirmed that he will not raise National Insurance, VAT or Income Tax. However, he did not rule out increasing taxes such as Capital Gains Tax or Inheritance Tax.
My guess is that the Chancellor will raise Capital Gains Tax rates on second properties, eliminate the higher rate tax relief on pensions, and lower the threshold at which the 45% Income Tax kicks in for the highest rate of taxpayers.
When will the rate changes/increases apply?
The main question we are receiving from clients at the moment is whether the increase in rates will be effective immediately or from 6th April 2025. Other than transactional taxes like Stamp Duty Land Tax and VAT, it is extremely rare for tax rates to increase mid-year.
Generally, the new rules are effective from the start of the next tax year on 6 April 2025; in some cases, they are effective from the date of the Budget and sometimes, but rarely, they will be effective retrospectively.
How are your individual clients starting to prepare for rumoured changes?
We have seen some of our clients take steps; however, the majority of our clients are waiting to see what will be announced.
We anticipate that most of our ultra-high-net-worth clients will remain in the UK as long as the changes aren’t too punitive. However, we have seen a small number of clients already leaving due to a combination of factors.
What’s been the reaction so far from businesses?
Our clients who own businesses are interested in how the Government will keep its promise of growing the economy and what incentives will be provided for them to invest. The owners of businesses will usually react to paying more tax by either increasing the price of their products or services if the increase is sustainable, or by reducing costs and making the business more productive.
Private equity houses and companies with money to invest are waiting to see what type of economic policy the new Labour Government adopts before making any investment decisions.
What is your advice to businesses and individuals looking to prepare for the budget?
The current Government sentiment is widely reported, and the direction of travel seems to be that public sector funding will increase, meaning that the Government will have to raise more revenue from taxes. The Prime Minister is most likely referring to the business community and high earners when he said those with the “broadest shoulders should bear the heavier burden.”
Business boards need to prepare for higher taxes by ensuring their businesses are efficient and productive. High-net-worth individuals should ensure that their investments are in the most tax efficient structures and be prepared to speak with their client partner soon after the Budget to assess the impact and whether there is anything that they can improve post budget.
If you are interested in receiving tailored business or individual financial advice around the upcoming Autumn Budget, please get in touch here.
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