Autumn Budget 2024: 4 things you need to know

id

Today, Chancellor Rachel Reeves revealed her first Autumn Budget – and if you were expecting a lot of change for pensions, you might be surprised. That said, there were some announcements that could impact you. So here are four things from today’s Budget we think you need to know.

1. Not much change to the tax you pay

First, some welcome news for pensioners: there were no changes announced to current tax-free cash rules. Previously, it was rumoured that the amount of tax-free cash you can get may be reduced from the current limit of £268,275 (your limit may be more than this if you have special protections in place). However, all rules are staying the same. Need a reminder of how tax-free cash works? Read Taking your tax-free cash: everything you need to know.

The Chancellor also confirmed that income tax bands, National Insurance rates, and VAT will all stay at their current levels.

However, there was an important announcement when it comes to your personal allowance (that’s the amount you can earn in a tax year before you need to pay income tax). It’s been frozen at its current level of £12,570 since 2021, but from April 2028 it’ll rise in line with inflation once again.

2. Some change to the tax paid on inherited pensions

Right now, your beneficiaries don’t pay inheritance tax on your pension savings – they’re exempt from it. This is because your pension plan isn’t currently included when the value of your ‘estate’ is calculated. 

Once calculated, your beneficiaries only pay inheritance tax on anything above the value of £325,000 – this is known as the tax-free threshold. This threshold can sometimes be higher depending on who you leave your estate to. 

Today it was confirmed the current tax-free thresholds will be frozen until 2030. 

The Chancellor also announced that, from April 2027, pensions will be included when calculating the value of your estate and therefore could be subject to inheritance tax. If the value of your estate, including any unclaimed pension benefits, exceeds the tax-free threshold, then there may be tax to pay. 

Whether your beneficiaries will pay inheritance tax or income tax on your pension savings may depend on if you’ve started taking money from your plan at the time of your death, and the age you are when you die.

The government are still figuring out the details of how this will work; inheritance tax is a complicated topic and things may still change. Once the final legislation is in place, we’ll give you more information.

3. You’ll get more from your State Pension

Pensioners are getting a 4.1% boost to their State Pension, thanks to the triple lock.

The triple lock is what’s used to decide how much to increase the State Pension by. It says the State Pension will need to rise by the highest of three measures: average wage growth, inflation, or 2.5%. 

Just like last year, this year’s increase was determined by rising wages. 

The increase means that, from next April, those on the full new State Pension will get around £11,975 each year, taking their weekly amount up to just over £230 (up from around £221). Overall, it’s an increase of about £470 a year.

4. Capital Gains Tax is going up

Capital Gains Tax (CGT) is the tax you pay on profits you make from selling assets like second homes and investments.

It was announced that, from today, the basic rate of CGT will increase from 10% to 18% and the higher rate (paid by higher and additional-rate taxpayers) will increase from 20% to 24%.   

The amount of CGT you pay on second homes hasn’t changed.

One last point…

Remember, it’s normal for financial markets to move in response to political news. We’ll be keeping an eye on how any changes might affect your pension investments, but if you’re worried, you can read our article about market fluctuations or watch our short video. 

Tax rules and legislation may change and your individual circumstances and where you live in the UK will have an impact on the tax you pay.

The information here is based on our understanding in October 2024 and should not be taken as financial advice. If you’re unsure please speak to financial adviser.