Autumn Budget 2024: Key Steps for Business Owners to Take

The Autumn Budget 2024 introduced a range of significant changes that could impact your personal business finances, tax obligations, and long-term planning. As a business owner, it’s crucial to act quickly and strategically to ensure you’re prepared for the evolving tax landscape. Rachel Reeves’ announcements will require you to reassess your current financial plans and take proactive measures to protect your personal and business interests.

 

While some of the changes in the Budget were signposted – e.g. the increase in the rate of capital gains tax, which actually turned out not to be as great as many feared – some were more of a bolt from the blue.  Shares in private companies and agricultural property (both of which were previously exempt from inheritance tax) will now effectively be taxed at 20% for the value of all such assets in excess of £1m.  This could place a huge new tax burden on the families of successful business owners – a burden that can be significantly mitigated with good planning.

Here’s a breakdown of the key changes and the essential steps you should consider taking following the Autumn Budget:

 

1. Assess Your Capital Gains Tax (CGT) Liabilities

 

The Capital Gains Tax rates have increased, with the basic rate rising from 10% to 18%, and the higher rate going from 20% to 24% for disposals made after 30 October 2024.

 

Action Steps:

 

• Review your assets: Take a close look at the assets you plan to sell or dispose of in the near future. The increased tax rates could significantly affect the overall amount you retain from sales or asset disposals.
• Get accurate valuations: Ensure that you have up-to-date valuations of your business and any relevant assets. This will help you plan more effectively for any CGT liabilities.
• Consult with a tax professional: Speak with your accountant or tax advisor about how to minimise the impact of higher CGT rates. They may recommend restructuring assets or planning disposals.

 

2. Plan for Inheritance Tax (IHT) and Estate Planning

 

While there were no changes to the Inheritance Tax (IHT) thresholds, they remain frozen at £325,000 for the Nil Rate Band (NRB) and £175,000 for the Residence Nil Rate Band (RNRB). This freeze means more estates will likely become subject to IHT due to inflation and rising property values.

 

Action Steps:

 

• Revisit your business succession plans: If you plan to pass your business to family members or other beneficiaries, now is the time to ensure that you’re structuring the transfer in the most tax-efficient manner.
• Consider gifts or trusts: Explore gifting strategies or the creation of trusts to reduce the value of your estate for IHT purposes. You may also want to consider making lifetime gifts to reduce the value of your estate before death.
• Review your Will: Make sure your Will is up-to-date and includes provisions for your business. The frozen IHT thresholds could impact how much of your estate is taxed, so planning ahead is crucial.
• Consider other structures.  Vehicles such as family investment companies and employee ownership trusts may be helpful in mitigating tax liabilities.  

 

 

3. Prepare for Pension Changes

 

Pensions will no longer be completely exempt from IHT. Starting in 2027, any unspent pension pots will be subject to IHT. While the specific tax rate is yet to be determined, this change could significantly affect your long-term financial planning.

 

Action Steps:

 

• Review your pension strategy: If you have a substantial pension pot, now is the time to review how you plan to use it during your lifetime. You may need to consider spending these funds while you can, rather than leaving them as unspent pension pots that may be taxed later.
• Consider pension planning for key employees: If you offer pensions to your employees, it’s essential to revisit your pension scheme options. Encourage key staff members to review their pension planning to avoid unexpected tax liabilities in the future.

 

4. Understand Changes to Agricultural and Business Reliefs

 

Starting in April 2026, both Agricultural Property Relief (AR) and Business Property Relief (BR) will be limited to 100% relief on the first £1 million of qualifying agricultural or business property. Any amount exceeding this threshold will only receive 50% relief.

 

Action Steps:

 

• Review your business property: If your business owns significant agricultural or business property, these changes may increase your tax liabilities. Be sure to consult with your accountant, tax advisor and solicitor to understand how your assets will be affected.
• Plan for future succession: If you’re planning to pass agricultural or business property to your heirs or partners, consider how the new relief thresholds may impact your estate planning. Transferring property before the thresholds are reached could help minimise IHT liabilities.

 

5. Reevaluate AIM Investments and Reliefs

 

AIM shares will continue to benefit from IHT relief, but the relief will be reduced to 50% starting in April 2026. Previously, AIM shares were exempt from both IHT and CGT, provided certain criteria were met.

 

Action Steps:

 

• Assess your investment portfolio: If you hold AIM shares or are considering investing in AIM-listed companies, review the potential impact of the reduced tax relief. This could affect both your personal and business finances.
• Consult your financial advisor: Speak with your financial advisor about how AIM investments fit into your overall portfolio and tax strategy, especially with the change in relief.

 

6. Seek Professional Advice and Take Action

 

With the numerous changes announced in the Autumn Budget 2024, now is the time to take proactive steps to protect your personal and business’s financial future. These changes are complex, and careful planning is essential to ensure you maximise your tax efficiency and minimise liabilities.

 

Action Steps:

 

• Schedule a meeting with your financial advisor: Get expert advice on how the new budget measures will impact your business. A tailored strategy will ensure you’re well-positioned to respond to these changes.
• Revisit your business structure: With changes to taxes and reliefs, you may need to adjust the structure of your business to optimise tax advantages and protect your assets.
• Speak with legal advisor: As specialists in advising business owners in respect of their personal and business affairs, speak with us to see how we can help you navigate these new changes and plan effectively for your personal and business needs.

 

Final Thoughts

 

The Autumn Budget 2024 has brought significant changes that require immediate attention from business owners. By reviewing your tax strategies, succession plans, and investments, you can navigate the changes more effectively and protect your personal and business’s future.