Autumn Budget 2024 – Changes to Inheritance Tax
The budget announced today has introduced significant updates to the landscape of Inheritance Tax (IHT) in the UK. We have been eagerly watching the budget announcement unfold in the House of Commons and the following is our understanding based on the announcement only, we await further details in the legislation that will follow:
Nil-Rate Bands Remain Frozen
The nil-rate band, which is the threshold below which no IHT is payable, as well as the residence nil-rate band (applicable to estates comprising of residential property passing to direct descendants) will remain frozen at their current levels for an additional two years – until 2030.
Pensions
One substantial change in the rules is that pensions will be considered when calculating the total value of an estate for IHT purposes from April 2027.
Alternative Investment Market (AIM) Shares (Business Relief)
For those investing in AIM shares and similar assets, the Business Property Relief (BPR) available will be reduced. Eligible assets will now only qualify for 50% relief instead of 100% as previously.
Relief on Business and Agricultural Assets
One of the most anticipated changes is the reliefs available for business and agricultural assets. From April 2026, the first £1 million of combined qualifying business and agricultural assets will continue to receive 100% relief from IHT. However, any value exceeding this threshold will only attract 50% relief. The implications of this change on lifetime gifting are still unclear, raising questions about how individuals may be able to adjust their gifting strategies to minimize potential IHT.
Non-Dom Tax Status to be abolished
The chancellor has announced that the non-dom tax regime and the concept of ‘domicile’ will be removed from the tax system in April 2025. In its place a residence-based scheme will be introduced which will provide incentives to investors to come to the UK temporarily.
Our highly qualified and experienced Private Client team will be continuing to closely monitor the rules and the legislation behind the changes in the budget so that we can provide you with legal advice tailored to your needs and individual circumstances. Should you wish to discuss your position and potential estate planning, then do not hesitate to get in touch.
