The UK’s Autumn Budget 2024 introduced several key changes which may impact individual estate planning strategies, particularly due to modifications to inheritance tax (IHT), business and agricultural relief, AIM shares and pensions. Here we look at some of the key headlines that have emerged and also tentatively keep in mind further details that are yet to play out.

Inheritance Tax Thresholds Frozen Until 2030

The Chancellor extended the freeze on the IHT threshold for the ordinary Nil Rate Band (NRB) at £325,000 until 2030. The Residence Nil Rate Band (RNRB) allowance of £175k (where the family home is passed to lineal descendants) is also here to stay…..for now.

This means up to £500,000 of assets can pass down to families, inheritance tax free before the rate of 40% kicks in for any amounts over this value. However, with property values constantly rising along with aspects such as the pension reforms outlined below, many estates may find themselves going beyond these thresholds so it’s important that individuals keep a close eye on their overall estate valuations.

Changes to Business and Agricultural Property Reliefs (BPR and APR)

From April 2026, new limits will apply to these reliefs with full relief being capped at the first £1 million of qualifying business or agricultural assets with a 50% relief (effectively a 20% tax rate) applying to qualifying values above this threshold. For business owners and farming families, this is a significant shift that will impact their succession planning. Do keep in mind that buy to let portfolios held in business structures do not usually qualify for business property relief and there are strict rules for BPR and APR qualifying assets.

Inherited pensions subject to inheritance tax

Again, this is a significant shift in policy. From April 2027, pensions will be included in IHT calculations which is a major change for those who relied on pensions as a tax efficient inheritance vehicle. With pensions now entering the IHT net, individuals may need to reassess their retirement and investment plans to manage tax implications that could reduce their estates values. The changes are subject to a 90-day consultation to establish how these changes will be practically implemented. We strongly encourage all clients to work closely with their financial adviser to understand these changes impact their position.

Reduced relief on AIM shares

Previously, AIM shares qualified for 100% relief after two years of holding, allowing these assets to be passed down tax free. However, from April 2026 AIM shares will only receive a 50% relief, effectively imposing a 20% tax on inherited assets. The decision stops short of fully removing the tax relief which may have destabilized markets and undermined investor confidence. For clients with significant investments in AIM shares as part of their estate planning strategy, a review with their financial adviser is highly recommended.

Abolition of non-domiciled (“non-dom) status

Effective from April 2025, this introduces significant changes for IHT planning for non-domiciled individuals. The shift will replace domicile based IHT rules with a residence-based regime meaning that individuals who have resided in the UK for ten years or more will face IHT on their global assets. Currently IHT for non-doms applies only to their UK assets which may allow them to keep certain overseas assets out of scope of UK taxation.

This area of tax law is complicated and advise from a tax specialist is recommend for individuals who find themselves within this situation.

Revisions to gifting exemptions and reliefs

Still yet to be clarified is how current gifting during lifetime and the 7 year rule for potentially exempt transfers (PETs) is to be impacted. There is uncertainty and speculation around this particular area and clients would be advised to keep a close eye on this aspect in the event that further modifications come to light.

Summary

The above is only a fraction of the content that was revealed in the Autumn 2024 budget as other aspects such as increased Stamp Duty Land Tax (SDLT) increases on second properties, changes to employers National Insurance Contributions and more changes were announced. With the government keen to deliver on the proposed £12.7 billion increase in tax revenues over the next 5 years, we certainly have some interesting times ahead.

From a client perspective, its important that existing estate planning strategies are closely scrutinized to confirm they are potentially as effective as they can be given the impact of the measures mentioned above. Whilst our focus is on estate planning strategies through the effective use of Wills and Trusts, our close partnerships with other professionals such as financial advisers and tax advisers ensures clients can expect to receive a well rounded circle of advice.

As ever, examples of high level strategies for clients to review and consider include;

• - Using trusts for controlled asset transfer whilst maximizing all available tax allowances.
• - Potentially gifting assets to reduce estate valuations over time and keeping it within IHT thresholds.
• - Reviewing pensions with their financial advisers will be of paramount importance when considering the impact of both inheritance and income tax implications in the future.
• - Insurance solutions for IHT liabilities which their financial adviser will be authorised and qualified to advise on.

By bringing together the expertise of qualified advisers in the field of estate planning, financial advice and tax planning, clients can expect to receive a holistic view on their future planning.

This article is for informational purposes only and does not constitute tax, financial or legal advice. The information provided is a collection of insights from various sources following the recent Budget announcement. If you do not have a financial adviser or tax adviser or would like a second opinion, please get in touch and we can recommend one of our trusted contacts authorised to advise in this area.

Don’t leave your legacy to chance, give the professional and friendly team at Beneficial Family Wills a call to discuss your circumstances and get the correct planning in place. With a free no obligation initial consultation to assess your needs, you can be assured that your legacy will live on.

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