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.
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.
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.
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 30 October 2024, 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%.
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.