The Autumn 2024 Budget hit investors and higher-net-worth individuals with a range of tax changes that you need to know about.
If you own shares, property or a business, these changes will affect your returns and may require you to think differently about how you invest.
We’ve seen capital gains tax rates jump, inheritance tax rules tighten, and reliefs for business owners reduced. These aren’t small changes – they’re substantial changes that could cost you thousands if you don’t plan ahead.
Let’s break down what’s actually changing and how you can adapt your investment approach to deal with the new tax reality.
Capital Gains Tax Rate Changes
In her Autumn Budget announcement, Chancellor Rachel Reeves introduced immediate increases to Capital Gains Tax (CGT) rates, which took effect from 30 October 2024. These changes have already impacted investors selling assets over the past few months.
The rates have increased from:
- 10% to 18% for basic rate taxpayers
- 20% to 24% for higher and additional rate taxpayers
This represents an 80% increase in the tax rate for basic rate taxpayers and a 20% increase for higher rate taxpayers – a substantial hike that significantly impacts the returns on investment disposals.
For example, a higher-rate taxpayer selling shares with a gain of £50,000 (after the annual exempt amount) would previously have paid £10,000 in CGT. Under the new rules, they’ll pay £12,000 – an additional £2,000 in tax.
These increased rates apply to all assets except residential property (which was already taxed at 18% and 24%), bringing all CGT rates into alignment. The annual exempt amount remains at £3,000 for individuals.
The timing of asset sales has become more critical than ever. If you’re considering disposing of investments with substantial gains, you’ll need to weigh the tax implications carefully against your other financial goals.
Dividend Tax Changes
For investors with share portfolios, the reduction in the dividend allowance from £1,000 to just £500 from April 2024 means more of your dividend income is now subject to tax.
The dividend tax rates remain unchanged at:
- 8.75% for basic rate taxpayers
- 33.75% for higher rate taxpayers
- 39.35% for additional rate taxpayers
This allowance reduction is particularly impactful for investors who rely on dividends for income. For a higher-rate taxpayer receiving £10,000 in dividends annually, the change means an extra £169 in tax compared to the previous year.
To put this in perspective, the dividend allowance stood at £5,000 just a few years ago, before being progressively cut to £2,000, then £1,000, and now £500. This represents a 90% reduction in the tax-free amount in a relatively short period.
For company directors who take dividends as part of their remuneration strategy, these changes, combined with the previous reductions in the allowance, make dividend payments less tax-efficient than they once were.
Many directors will need to reassess the balance between salary and dividends.
Investment Property Changes
The stamp duty surcharge on second homes and buy-to-let properties has increased by 2 percentage points with immediate effect from the Autumn Budget.
This means an investor purchasing a £250,000 buy-to-let property now pays £15,000 in stamp duty compared to £10,000 previously – an additional £5,000 upfront cost.
New property investors will need to factor these increased acquisition costs into their return calculations, while existing landlords may wish to review their portfolios to assess whether some properties still deliver adequate returns given the less favourable tax treatment.
Business Asset Disposal Relief Changes
Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, allows business owners to pay a reduced rate of CGT when they dispose of qualifying business assets.
From April 2025, the reduced CGT rate under BADR will increase from 10% to 14%. This will rise further to 18% for disposals made on or after 6 April 2026.
Let’s consider the impact with a practical example. For a business owner selling assets with a £5 million gain that qualifies for BADR:
- Sale before 6 April 2025: CGT at 10% = £500,000
- Sale between 6 April 2025 and 5 April 2026: CGT at 14% = £700,000
- Sale after 6 April 2026: CGT at 18% = £900,000
That’s a potential additional tax cost of £400,000 if the sale is delayed until after April 2026.
The government has also introduced anti-forestalling rules to prevent taxpayers from avoiding the new BADR rates by electing to trigger gains on historic share reorganisations, exchanges, and connected party transactions.
If you’re planning to sell your business or dispose of qualifying business assets, the timing of this transaction has become more critical than ever. Business owners nearing retirement or considering an exit strategy should assess whether accelerating disposal plans might be beneficial.
Agricultural and Business Property Reliefs for Inheritance Tax
In one of the most contentious tax changes, the Chancellor announced that from April 2026, the availability of 100% relief for agricultural and business property will be capped at £1 million. Beyond this threshold, the relief will be reduced to 50%.
Currently, Agricultural Property Relief (APR) and Business Property Relief (BPR) can provide 100% relief from inheritance tax with no upper limit, making them powerful tools for passing on farms and businesses to the next generation.
Under the new rules, assets eligible for 100% APR and assets eligible for 100% BPR will count towards a combined £1 million cap. For example, if you have £800,000 of agricultural property and £400,000 of business property, only £1 million of these assets will qualify for 100% relief, with the remaining £200,000 receiving 50% relief.
This represents a massive,, controversial change to a long-standing relief that has helped keep farms and family businesses intact through generational transfers.
For farms and businesses with values exceeding £1 million, which is common given current land and property values, inheritance tax planning will become more complex.
The government estimates around 2,000 estates will pay more tax following this policy change, while agricultural organisations suggest the impact could be much wider, potentially affecting up to 70,000 farms.
If you own a farm or business that could be affected by these changes, now is the time to review your succession plans. You might want to consider making lifetime gifts, restructuring ownership, or exploring other inheritance tax planning strategies before the changes take effect in 2026.
Non-Dom Status Abolishment
From April 2025, the non-domicile (non-dom) tax regime will be abolished and replaced with a residence-based system.
This means that UK residents who previously claimed non-dom status will be taxed on their worldwide income and gains, regardless of whether they bring the money into the UK.
The current system allows non-doms to pay UK tax only on money they earn in the UK, with overseas income exempt unless it’s brought into the country. Under the new rules, anyone who has lived in the UK for more than four years will be taxed on their global income and gains.
To ease the transition, the government is introducing a Temporary Repatriation Facility – a three-year scheme allowing former non-doms to bring assets to the UK at a discounted tax rate. The Chancellor recently announced plans to make this transitional period more generous, responding to concerns about wealthy individuals potentially leaving the UK.
This change will have large-scale impacts for international investors with UK interests. Those currently benefiting from non-dom status should seek advice on restructuring their affairs before April 2025.
Pension Inheritance Tax Changes
From April 2027, the government will start charging inheritance tax on pension pots that haven’t been spent when you die. This marks a substantial change from the current system, where pensions sit outside your estate and pass to your beneficiaries free of inheritance tax.
This change creates a new challenge for retirement planning. If you have a substantial pension pot and other assets like property, your estate could now exceed the inheritance tax threshold when you die. In that case, your heirs might face a 40% tax bill on anything above the threshold.
For example, if a couple has a family home worth £700,000 and combined pension savings of £500,000, their total estate would be £1.2 million.
Even with the combined nil-rate bands of up to £1 million for married couples, this could leave £200,000 subject to inheritance tax – resulting in an £80,000 bill that wouldn’t exist under current rules.
The inheritance tax nil-rate band of £325,000 per person has been frozen until 2030.
If you’re concerned about inheritance tax on pension savings, you might consider:
- Adjusting your retirement spending strategy to use more pension funds during your lifetime
- Reviewing the balance between pension savings and other investments
- Making lifetime gifts to reduce your overall estate value
- Exploring whether your pension arrangement offers any specific protections
Strategic Planning Recommendations
These tax changes require thoughtful action from every investor, as well as those with second properties, business assets, farms, or complex international tax setups. With careful planning, you can adapt to these new rules while keeping your investment strategy on track.
Here’s what you can do now to protect your investments and reduce your tax bills:
1. Review your investment structures
The increased CGT rates and reduced dividend allowance make tax-efficient wrappers more valuable than ever. Maximise your ISA allowance (£20,000 for 2024/25) and consider whether pension contributions might be appropriate, given their upfront tax relief and tax-free growth.
2. Consider the timing of asset disposals
With staged increases to Business Asset Disposal Relief rates, the timing of business disposals has become more critical. Similarly, for other assets with substantial gains, consider whether staggering disposals across multiple tax years might help manage your CGT liability.
3. Reassess property investments
With increased stamp duty on purchases and higher taxes on income and gains, review whether your property investments still deliver adequate returns. Consider whether incorporating your property business might offer advantages, though this requires careful analysis.
4. Update succession planning
If you own a farm or business that might be affected by the changes to Agricultural and Business Property Relief, review your succession plans. There may be advantages to making lifetime gifts or restructuring ownership before the April 2026 changes.
5. Explore pension drawdown strategies
With pensions set to be brought into the inheritance tax net from 2027, consider whether your current retirement income strategy needs adjustment. Drawing more from your pension and preserving other assets might be more tax-efficient in some circumstances.
How Double Point Can Help
As you can probably sense, these tax changes create a complex planning environment for investors.
At Double Point, our team of chartered accountants specialises in providing customised tax advice to investors and business owners.
We’ll help you understand how these changes affect your specific situation and identify strategies to minimise their impact. We look at your overall financial position, not just individual tax issues in isolation.
Contact us for a free consultation to discuss how we can help you tackle tax challenges now and in the future.
