Rachel Reeves, the Chancellor of the Exchequer, announced the Autumn Budget on Wednesday, 30 October 2024. The budget set out a number of changes to capital gains and inheritance tax that will affect estate planners.
So what are these changes?
Capital Gains Tax
From 30 October 2024, the lower main rate of capital gains tax will increase from 10% to 18%. The higher main rate will increase from 20% to 24%. The rate of residential property will remain at 18% and 24%.
Non-Dom Tax Status
This is to be abolished from April 2025. The current rules are to be replaced by a new 4-year regime where those arriving in the UK after being non-resident for 10 years previously, will not be taxed on foreign income or gain regardless of whether they are brought to the UK or not.
IHT will be due on a person’s worldwide assets on their death if they have been resident in the UK for 10 years out of the last 20 tax years. This will affect the taxation of trusts, however, we are yet to see the finer details.
Allowances to be Frozen
The nil rate band and the residential nil rate band current rates of £325,000 and £175,000 are to be frozen for a further 2 years until April 2030. The taper threshold of £2 million for the residential nil rate band is also to remain the same.
Agricultural and Business Property Relief
From April 2026, it is proposed that the first £1 million of combined business and agricultural assets will have no inheritance tax payable and the 100% rate of relief will still apply. For assets above £1 million, inheritance tax will apply but the rate of relief will be 50%.
From 6 April 2026, AIM shares will only benefit from BPR at a rate of 50%
Pension and Death Benefits
It has been proposed that any unused pension funds and death benefits payable from a pension will fall into a person’s estate and therefore become subject to IHT from 6 April 2027.
As with all changes, we await to see how these changes will come into affect. Once we have further information, our guidance will be updated accordingly.
