Budget 2024: What It Means for High Earners

31 Oct Budget 2024: What It Means for High Earners

The 2024 Budget includes several measures that will impact high earners and those with substantial assets.

1. Capital Gains Tax (CGT): Starting in April 2025, CGT rates will rise, with general asset sales taxed at 18% for the lower band and 24% for the higher. Carried interest will face an increased rate of 32%, making capital-heavy investment returns more costly.
2. Inheritance Tax Adjustments: The freeze on the inheritance tax threshold remains in effect until 2030, keeping it at £325,000. Additionally, the rules tighten for inherited pensions, bringing them into scope for inheritance tax from April 2027. For agricultural and business property, estates valued over £1 million will see changes with a new effective rate of 20% on amounts above this threshold, which limits previously available reliefs.
3. End of the Non-Dom Regime: From April 2025, the UK’s non-domiciled (non-dom) tax status will be abolished, meaning foreign nationals residing in the UK will be taxed on their global income. This change aims to ensure those who benefit from living in the UK contribute equitably to its tax base and is expected to raise significant revenue
4. Additional Costs for Private Education and Luxury Travel: Starting in 2025, private school fees will include 20% VAT, potentially increasing the cost of private education substantially for families. Additionally, air passenger duty on private jets has been raised by 50%, translating to around £450 per passenger for long-haul flights, adding further expenses for high-net-worth individuals who often rely on private travel.
5. Tax-Free Allowance for High Earners Unchanged: While personal income tax bands remain unchanged, threshold freezes over the years will likely bring more high earners into the higher tax brackets by default. This shift may increase effective tax rates for those nearing the upper-income limits and may necessitate careful income and asset planning to manage total liabilities

These changes are significant for wealth and tax planning, suggesting a closer review of personal financial strategies may be beneficial. Planning around asset disposal timing, considering trust structures, and re-evaluating legacy and succession strategies could help in managing the impact of these adjustments.

Consulting a tax specialist can ensure that these strategies are tailored effectively to individual circumstances, maximising tax efficiency and long-term stability.