Autumn Budget 2024 and inheritance tax

• The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027
• The government will reform agricultural property relief and business property relief from 6 April 2026. In addition to existing nil rate bands and exemptions, the current 100% rates of relief will continue for the first £1 million of combined agricultural and business property. The rate of relief will be 50% thereafter and, in all circumstances for quoted shares designated as “not listed” on the markets of recognised stock exchanges, such as the alternative investment market (AIM)
• The inheritance tax nil rate bands were frozen at their current rates by the previous government until 5 April 2028. Reeves announced that this period will be increased by two years (5 April 2030). The nil rate band will remain at £325,000, the residence nil rate band at £175,000 and the residence nil-rate band taper will continue to start at £2 million. Qualifying estates can still pass on up to £500,000 and the qualifying estate of a surviving husband, wife or civil partner can continue to pass on up to £1 million without an inheritance tax liability
• Current rules surrounding gifting remain unchanged

Although the Budget didn’t wrangle with IHT quite as much as had been expected, the lack of change to the thresholds could make more estates liable to IHT in the coming years.

“There was no change to the nil-rate bands – but the freeze on those exemptions has been extended from 2028 to 2030 which will draw more families into IHT by the process of fiscal drag,” says Ian Dyall, head of estate planning. “This process will be accelerated by the inclusion of defined contribution pension pots in taxable estates, which will bring even more families into the IHT net.

“While the changes to agricultural and business property are a less aggressive move than expected, it is still possible that modest family-owned and managed businesses could get caught up in measures intended to target the very wealthiest families.

“As for AIM shares, the fact that they were not ejected from business relief altogether has seen a relief rally of 4.4% in the AIM index today, which indicates that these investments will still have a role to play in estate planning.

“The major change as far as most families is the inclusion of pension pots into the calculation of estates for IHT liability. This will change the estate planning wisdom for some retirees on how pension savings are used in retirement.”

There have been significant changes announced in the Autumn Budget, which could have implications for your financial plan. That makes it a great time to speak to a professional about your situation, and at Evelyn Partners we have the experts who can help. You can speak to your usual Evelyn Partners contact, book a free initial consultation online, or call 020 7189 2400.