November 2024: Life, Retirement and the Budget

Many thanks to all the readers who replied to my last email in which I talked about your most important transition – retirement.

Nick Ledingham, former director and owner of the accountancy firm Morris & Co (now DJH) wanted to add a fourth question…

Is it time to give something back?

He suggested that:

“The time available in retirement isn’t just about what you do for yourselves. It is also about what you can do for others now that you are financially secure. It is more important and certainly more rewarding to spend the time doing things for other people.”

Just to highlight how everyone approaches this stage in their own way, another recently retired client (Jo Wirdnam, former practice owner at Burgess Hill Dental) also responded and explained that, whenever she is asked what she is doing now, she gets a bit embarrassed and stumbles over a substantial reply.

“I’m not saving the world! Nothing very worthy at all. I just answer: “Whatever I feel like doing at the speed I feel like doing it”. Sometimes that is just binge-watching Netflix and sometimes it involves precarious DIY at the top of a very long ladder.” 

“I go on longer holidays. I eat better and I’m far more active. I’m spending time with people I want to spend time with and losing the worry, frustration and fear that for me came with running a practice.”

The Budget

After months of speculation, the Autumn Budget was delivered by the Chancellor Rachel Reeves on 30 October.

While many investors were rushing to make changes based on mere speculation, we encouraged caution.

Now that the Chancellor has delivered the budget, we have a clearer picture of the changes ahead and can begin to unpack the details that are yet to emerge.

Before looking at some key takeaways, let's remember a core financial planning principle: your long-term financial security should always be the foundation of any decisions you make.

While tax is a crucial component of sound financial planning, it should not be the sole driver of our strategies.

What to focus on…

Employer National Insurance

Starting from 6 April 2025, employers will face an increase in National Insurance contributions from 13.8% to 15% and the employer NI threshold (secondary threshold) will reduce from £9,100 to £5,000 per year.

This is likely to impact many business owners and influence employment decisions, so we will be sure to guide you through any changes.

Corporation Tax

The government has published a Corporate Tax Roadmap, committing to cap the Corporation Tax Rate at 25% and maintain current rates for small profits.

This provides some certainty for business planning, but we will need to watch for future developments.

Pensions and Inheritance Tax

Contrary to speculation, most pension-related matters remained untouched.

However, a significant change is coming.

From April 2027, unspent pensions will be brought into the Inheritance Tax (IHT) regime. This could have substantial implications for estate planning and intergenerational wealth transfer.

We are still processing the full implications of this although, for clients with personal pensions and estates above the nil-rate band, it is likely we will be updating our advice.

It is important to remember this will not change until April 2027 and transfers between spouses on death will remain outside of the IHT calculations.

Capital Gains Tax

Effective from 30 October 2024, the main rates of CGT increased from 10% and 20% to 18% and 24%, respectively.

This change emphasises the need for strategic planning regarding asset disposals.

Stamp Duty Land Tax

From 31 October 2024, the surcharge on additional property purchases increased from 3% to 5%. This change could impact investment strategies for those considering property investments.

Why we keep it personal

While these changes provide a general framework of what changes to make, it is crucial to remember that every investor has a unique financial situation.

What might be an optimal strategy for one client could be less suitable for another. As we digest these changes, we will consider how they interact with your circumstances and goals.

Some of the announced changes require further clarification, and we are actively monitoring for additional details.

At our next planning meeting with you, we will discuss how these changes might affect your financial plan.

As always, our focus remains on your long-term financial well-being. While budget changes can seem daunting, they are just one factor in the broader landscape of your financial journey. We have navigated changes before and will continue to adapt and optimise your plan as needed.

If you have any immediate questions or concerns, please don't hesitate to reach out. We are here to provide clarity and guidance as we move forward together. Stay focused on your long-term goals and let's work together to make the most of the opportunities that lie ahead.

“The best way to teach your kids about taxes is by eating 30% of their ice cream.” 

Bill Murray

Making an impact

Since the Budget, we have already started changing the advice we have been giving for decades.

For one couple, we have always recommended they leave the money in their personal pensions to spend last – i.e. to spend cash savings and ISAs first.

However, we recently agreed the best option for them was to encash their pension commencement lump sum (up to the tax-free element of £268,275), and have the cash available for their house renovations and to gift to their children.

We have helped reassure them they are financially secure despite the gifts, so provided they survive the seven years, they will be reducing their inheritance tax liability.