What does the Autumn Budget mean for you?

The Chancellor’s Autumn Budget contained several important announcements that could affect your personal finances. We’ve outlined a summary of the key points below.  

Income Tax 

The headline grabbing announcement was the decision to further increase the rate of tax on savers and landlords. From April the rate of tax payable on savings interest and rental income will increase by 4%, taking rates to 24%, 44% and 49%.*

A new tax allowance for those over State Pension age with a total income at or under the value of the full new State Pension will ensure they don't face the administrative burden of paying small amounts of tax. 

The tax-free personal allowance and the points from which 40%- and 45%-Income Tax becomes payable remain fixed until April 2031. This will see a growing number of people being dragged into paying higher rates of tax as incomes increase.  

This continued freeze on allowances and the increase in tax on rental and savings income makes it more important than ever to take advantage of your ISA and Pension allowances to protect income and gains from tax.

*Rental income is subject to different rates in Scotland.

ISA Allowances 

The Chancellor reversed plans to reduce the Cash ISA allowance for the under 65s to £12,000 from April. The allowances will remain at £20,000 per adult and £9,000 per child each tax year.  

He announced plans to develop a new ISA incentive to encourage more people to invest in a Stocks and Shares ISA for the first time, and access their long-term growth potential.

Inheritance Tax 

As previously announced most unspent pension funds will be included in Inheritance Tax calculations on death from April 2027.  As a result, more families will pay Inheritance Tax, while others will see their existing liability grow.  

The tax-free allowance of £325,000 and the additional £175,000 available to many if passing a home to a ‘direct descendant’ remain fixed until April 2031.  

Changes came into effect in April this year, limiting the protection from Inheritance Tax when passing on farms and qualifying businesses. These restrict Agricultural and Business Property Relief at 100% to £2.5m per person, and 50% on qualifying assets above this amount.

These changes will have a significant impact on farmers, landowners and business owners. It’s important to take advice on the new rules and how they impact you and your family.   

Capital Gains Tax

The Chancellor announced plans to reduce Business Asset Disposal Relief, which may be available when disposing of all or part of a qualifying business. Currently up to £1m of gains are charged at 18% (rather than the top rate of 24%). From April the £1m allowance will be reduced to £500,000.

Pensions 

Despite fears that the many tax advantages of pensions would be trimmed back, they were left largely untouched. 

Pensions remain one of the most tax-efficient ways to invest. In addition to tax relief on what you pay in, any growth is free from UK Income Tax and Capital Gains Tax. Up to 25% of your fund can be taken as a tax-free lump sum (capped at £268,275 unless you have protection). 

Getting the right advice can help you make the most of the tax advantages. 

How did the markets react? 

UK financial markets were relatively composed ahead of this year’s Budget. Although global government bond markets had been buffeted by oil prices, AI-related borrowing and French politics, there were fewer UK-specific headlines in the lead-up to the Chancellor’s statement. Gilt yields were comparatively stable, and market expectations were for a muted reaction. Those expectations were largely met: a low-key Budget, with few major surprises for markets overall, was followed by modest gains in UK government bonds and equities.

Within UK equities, banks and housing-related stocks had attracted attention ahead of the Budget amid expectations of additional taxes on banks and a new support scheme for first-time buyers. Bank shares edged higher as the temporary surcharge imposed on profits was lower than feared, while housebuilders gave back some of their pre-budget gains after the scheme was confirmed.