Court of Protection

Autumn Budget 2024

A new government with new Chancellor Rachel Reeves used the budget speech to address the long-awaited news on how she intends to meet not only the often mentioned £22bn deficit, but the £40bn she says is needed to prevent further cuts to government departmental budgets.

30 Oct 2024

Pensions

Triple lock (an increase based on whichever is highest between 2.5%, inflation, or earnings growth) is to be applied to the state pension at 4.1% in April 2025, but the lack of increase on the personal allowance figure will drag more of those receiving state pension into liability for income tax.

Benefits

Focus on getting people back to work.  Expansion of fraud investigations and providing direct access to bank accounts to recover money.

Income Tax

Frozen until 28/29.  No increase in personal allowance for another four years, which follows the previous government’s budgeting decisions on income tax in recent years.  This indirectly raises tax on income, including on the state pension income of some pensioners, as incomes and pensions increase to reflect inflation or the cost of living.

Analysis by Quilter, a wealth management company, found that “The freeze is rapidly turning into a major tax burden for older Britons with estimates based on the data showing that the move could potentially drag 1 to 1.5 million extra pensioners into higher or additional rate tax brackets.”  With the freeze on personal allowance already set to continue until 2028, there could be millions more pensioners paying income tax on state pensions over the coming years.

National Minimum Wage

To rise by 6% from £11.44 to £12.21 in 2025.  A larger increase of 16.3% is introduced for workers aged 18-20 to help close the gap between them and the older workers.

National Insurance (Employee)

In line with mandate in manifesto, no change.

National Insurance (Employer)

In line with not actually being included specifically in the Labour Party manifesto, employer National Insurance Contributions (NICs) increase from the current 13.8% by 1.2% to 15% for employers and a cut to the current earnings threshold of £9,100 to £5,000.

The Chancellor says she will assist one million small businesses by increasing an allowance on the first £5,000 of employer NICs to £10,500.

It has been reported ahead of the budget that this is a burden solely for the private sector, as the public sector (e.g. NHS, government departments, etc) will be reimbursed by the Treasury.  It is likely to lead to reduced wage growth as employers seek to cover these additional costs.

Business Rates

The current 75% discount to rates was due to expire in April 2025 and is to be replaced by a discount of 40% (to a maximum of £110,000).  As the BBC states “it still means that many businesses will see their business rates nearly double (rather than quadruple).”

Capital Gains Tax (CGT)

More closely aligned with tax rates for income tax.  Rates increase from 10% to 18% for the lower rate and 20% to 24% for the higher rate.  Rates for residential property remains at 18% and 24%.

Business Asset relief to remain at 10% at present, rising to 18% by 26/27.

Inheritance Tax

£325,000 inheritance tax continues to be frozen, with an extension until 2030.  There is no change to the IHT tax-free combined amount of £1m for a couple leaving property to children or further descendants.

Inherited pensions will be brought into IHT from April 2027.

Business Property Relief (BPR), Agricultural Property Relief (APR) and Alternative Investment Market (AIM) to be reduced.  BPR and APR tax free up to £1m.  Businesses over £1m will have 50% relief on IHT, making an effective rate of 20%.  For AIM shares a 50% relief will apply (making the effective rate 20%).

Concerns about inheritance tax limitations on investment in AIM businesses led to almost £6bn in reductions to the value the AIM stock market pre-budget as investors sold off shareholdings.

Stamp Duty Land Tax (SDLT)

The chancellor announced that the government will increase SDLT on second homes from 3% to 5% from tomorrow (31st October 2024).

No announcement was made on extending the scheme providing increased thresholds at which people start paying stamp duty on purchases of homes.  The “nil rate” threshold was raised from £125,000 to £250,000, and from £300,000 to £450,000 for first time buyers, and is due to end in March 2025.

The Times reported on data from Savills which found that the average price for new homeowners in London is £480,040, so a first-time buyer at this level would pay an additional £6,250 from 1st April 2025.  Across the whole country the end of the scheme will add £2,500 of SDLT to the average house purchase.

The Times also echoed the concerns raised by the Resolution Foundation, a think tank.  Both warn that in the short term there would be a cliff-edge rush of people attempting to complete property deals before the March deadline (that’s 152 days from 30th October).  In the longer-term issues with stamp duty could deter home moves.

Gambling Tax

Rumours about significant increases led shares in gambling companies to fall sharply in the weeks preceding the budget speech.  No announcement was included in the budget speech.

Fuel Duty

Freeze to 5% cut in fuel duty to continue for a further year.

Alcohol Duty

Draught alcohol duty reduced by 1.7%.

Tobacco Duty

Increases remain at RPI + 2%.  Hand rolling tobacco increased by 10%.  Vaping liquids to have flat rate duty from October 26.

Other

The £2 cap on bus fares, which costs the Treasury £350m annually, was due to expire at the end of 2024.  In London the TFL bus fare is £1.75, but for other bus users there will be an increase in bus fares to £3 until the end of 2025.

M&P Commentary

Samantha Hamilton, head of the Court of Protection department at Mullis & Peake LLP, said:

“For our elderly and vulnerable clients, there seems little protection from cuts.  The loss of the Winter Fuel Payment to those who fail to qualify for Pension Credit is hard felt when the freeze on the personal allowance for income tax leads to taxation of the state pension for increasing numbers.

The VAT charge for private schooling increases the cost for parents of children with special educational needs (SEN) unless the local authority has permitted funding under an education, health and care plan (EHCP).  Waiting years for an assessment and then waiting further for the EHCP means parents opt to scrimp and save to pay for private schooling for a child with SEN but will now face a 20% increase on fees from January 2025.

It seems the protection for “working people” is at a cost for older and vulnerable people who do not (or cannot) work.”

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