After all of the speculation, the UK Government announced the Autumn Budget on 30th October 2024. Within the budget there were a number of inheritance tax changes which may affect you and your estate planning. These include:
The Nil Rate Band and Residence Nil Rate Band
Each individual has an inheritance tax free allowance (known as the nil rate band) which is currently set at £325,000. If your estate exceeds this amount, the balance in excess of the nil rate band could be subject to inheritance tax unless other exemptions can be claimed. The inheritance tax rate is 40%.
The residence nil rate band allowance can be claimed where a property is left to direct descendants without any contingencies. This inheritance tax relief is currently set at £175,000 (and is tapered if your estate exceeds £2 million).
Whilst there was speculation that the nil rate band and residence nil rate band could be abolished or reduced, the Government has announced that these allowances will remain the same until 2030.
Business Property Relief and Agricultural Property Relief
Agricultural Property Relief (APR) and Business Property Relief (BPR) are important inheritance reliefs which can be claimed against business or agricultural assets. The reliefs are available at either 100% or 50% depending on the type of assets.
From April 2026, there will now be a combined limit on these reliefs with the full 100% relief for both agricultural and business now being set at £1 million. If agricultural and/or business property exceed this value, the value over that could be subject to inheritance tax unless other exemptions can be claimed.
Pensions
Currently the value of an inherited pension can be excluded from your estate for inheritance tax purposes. However, from April 2027, inherited pensions are set to become subject to inheritance tax. This is under consultation from now until the end of January 2025 so we aren’t sure how this will work in practice just yet however this could have a major impact on your tax planning. We are keeping a close eye on the updates in relation to this.
These changes are significant and it is really important for clients to be reviewing their tax planning options alongside their Wills now.
For expert legal guidance and support with your estate planning, please contact our Wills Trusts and Probate team on 01788 579579 or email at info@brethertons.co.uk.