Rachel Reeves’ budget marks a pivotal shift, bringing fresh challenges for financial advisers across the UK. Matt Wood, Managing Director of AMFA, emphasises the need for a proactive, strategic approach to address rising CGT rates, changes in Business Property Relief, and pensions’ evolving role in inheritances. Now more than ever, precise planning is essential to secure clients’ futures.
Matt said: “The budget plans set out by Rachel Reeves signals a new era, not only politically but also for Financial Advisers across the country. While the ultimate outcomes may seem a little softer than some of the ‘Political sandbagging’ might have suggested there is no doubt we are being called to action to confront fresh challenges under the Labour government – can we Advisers rise to the challenge? Absolutely!
“There is no denying that the rise in Capital Gains Tax (CGT) rates to 18% and 24% puts immediate pressure on clients with appreciating assets. The shift demands proactive approach, placing emphasis on timing, gifting and maximising current allowances to soften it’s impact. A closer look at the Budget document reveals that the new rates apply immediately for disposals made on or after 30 October 2024 – an essential detail notably absent from the Chancellor’s statement and one with immediate impact.
“Meanwhile, the adjustment in Business Property Relief (BPR)- 100% relief on the first £1 million of qualifying business and agricultural assets, but only 50% thereafter- forces high-value estates, particularly family owned businesses, to reassess succession and wealth transfer plans. As such, it is likely that Advisers will be considering outcomes such as re-structuring businesses and encouraging clients to consider making gifts sooner rather than later before these changes take effect in April 2026.
“With unspent pension pots now deemed ‘in-scope’ for Inheritance Tax (IHT) from 2027; Pensions are clearly no longer able to serve as the purely tax-efficient legacy vehicle they once were. This shift creates a distinct juxtaposition and while advisers must now address the new long term implications of IHT we are also tasked with ensuring the long-term sustainability of clients ‘ retirement funds. We are all left asking whether it is better to spend it or save it? A question that really underpins the need to advisers to continually navigate the fine line between ensuring a comfortable retirement for clients and preserving wealth for the next generation.
“Ultimately, these changes highlight the absolute necessity for proactive, precise financial planning. As advisers we must embrace these changes which underscore the growing complexity of effective wealth management and reinforces the value in accurate, adaptive financial advice. It is time to take the bold steps required to secure our clients” futures in a rapidly evolving environment.”
