Personal Taxes and the Budget
Personal Taxes and the Budget
Tax Thresholds
• Personal tax thresholds have remained frozen until 2028, meaning fiscal drag will continue as planned.
• From 2028/2029, thresholds are expected to increase in line with inflation.
Minimum Wage
• National Living Wage will increase by 6.7% to £12.21 per hour starting next April.
• Minimum wage for 18-20-year-olds will rise by 16.3% to £10 per hour.
Non-Domiciled Status
• The non-domiciled tax system is to be abolished from April 2025 (Conservatives previously scrapped the non-domiciled special status in their Budget, but Labour has now further amended the rules, removing the option for non-domiciles to move funds offshore ahead of the full change in April 2025).
Capital Gains Tax (CGT)
• Capital Gains Tax (CGT) rates have increased to bring all assets (including residential property) to the same levels of 18% for basic rate taxpayers and 24% for higher rate taxpayers.
• Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes have been extended to 2035.
• Primary residences will continue to be exempt from CGT.
• CGT on carried interest will rise to 32% from 2025, specifically targeting the fund management industry.
Inheritance Tax (IHT)
• The Inheritance Tax (IHT) nil rate band remains frozen at £325,000 for individuals, while the residence nil rate band remains at £175,000 for estates up to £2 million. Both thresholds are frozen until 2030.
• From April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax, but for assets over £1 million, inheritance tax will apply with 50% relief, at an effective rate of 20%.
• A 50% relief now applies in all circumstances on inheritance tax for shares on the alternative investment market, and other similar markets, setting the effective rate of tax at 20%.
Tax on Pensions
• The 25% tax-free lump sum for individuals drawing from their pensions has been retained.
• Starting in 2027, pensions will once again form part of the deceased's estate for IHT purposes (so the spousal benefit will apply to this).
• The triple lock system on the state pensions has been maintained.
Stamp Duty Land Tax (SDLT)
• First-time buyers purchasing a property will now pay SDLT at the 2025 rate of 5% on properties priced above £300,000 and below £500,000.
• For first-time buyers purchasing a property priced above £500,000, the standard SDLT rates for 2025 will apply.
• The SDLT surcharge for second and additional properties has been increased from 3% to 5%, effective from 31st October 2024.
Source: Timeline budget breakdown
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