The recent Autumn 2024 Budget has introduced important changes to tax policies, which could have significant implications for estate administration and planning. With new measures announced by Chancellor Rachel Reeves aimed at stabilising public finances, it's crucial to understand how these updates may affect your estate strategy.
Key Inheritance Tax (IHT) Reforms You Should Know About
The Chancellor's new four-point plan focuses on increasing revenue, directly impacting estates in probate. Here’s a summary of the main changes:
- Freezing the Nil-Rate Band (NRB) Until 2030
The threshold for the Nil-Rate Band remains at £325,000 until April 2030. Given rising property values, this freeze means a larger number of estates may now fall within the taxable bracket, particularly those with significant property holdings. - Inclusion of Pension Funds in IHT Calculations
Starting from April 2027, unused pension funds and death benefits will be included in the calculation of your estate for IHT purposes. This change eliminates the current exemption status and could push many estates over the IHT threshold. Early estate planning and careful asset allocation will be essential to navigate this new rule. - Reforms to Agricultural and Business Property Reliefs
From April 2026, significant changes will apply to reliefs for agricultural and business properties. Estates will now receive 100% relief only on the first £1 million of combined agricultural and business assets, with any amount beyond that qualifying for 50% relief. Additionally, shares listed on the Alternative Investment Market (AIM) will see their relief halved, resulting in an effective IHT rate of 20%.
These reforms are expected to increase IHT liabilities, particularly for estates with property, agricultural assets, or certain business interests. It’s likely that more comprehensive estate planning will be needed to identify all assets and develop strategies to minimise tax exposure. If you have concerns about how these changes might affect your estate, now is an ideal time to consult with us for tailored advice and proactive planning.
We are here to help you navigate these updates and ensure your plans remain aligned with your long-term goals. Don’t hesitate to reach out with any questions or to schedule a review of your estate plan.
