What are the recent changes to UK Inheritance Tax announced in the 2024 Autumn Budget
RJT Wills provide Wills and Lasting Powers of Attorney services across North Yorkshire, Durham and Teesside. This blog provides a summary of the changes to Inheritance Tax
Recent changes to UK Inheritance Tax (IHT), announced in the 2024 Autumn Budget, introduce significant reforms that will impact estate planning:
Nil Rate Band freeze (NRB) freeze. The NRB is currently set at £325,000 since 2009. This the individual’s allowance given for Inheritance Tax i.e. a value 0% after which the remaining estate is taxed at 40%. The budget has frozen this amount till 2030. The residence nil rate band, which adds an extra £175,000 allowance for homes passed to direct descendants, is also unchanged.
Inclusion of Pensions in IHT (from April 2027): Unused pension funds will become part of the taxable estate, potentially subjecting them to the 40% IHT rate. This change affects beneficiaries and is expected to raise government revenue by £1.5 billion annually by 2029-2030.
Caps on Agricultural and Business Property Relief (APR and BPR): Starting April 2026, the value of these reliefs will be capped at £1 million. Previously, such assets could receive up to 100% relief with no cap. This reform may lead to higher tax bills for estates with substantial qualifying property, such as family businesses or farms. Assets exceeding the cap will receive only 50% relief.
Administrative Changes: Executors and trustees face increased complexities. Pensions and high-value APR/BPR assets require careful valuation, and unused pension assets will necessitate reporting by pension scheme administrators.
These changes demand that individuals review their estate planning strategies to minimize tax liabilities, including gifting, trust arrangements, and exploring insurance options. Professional advice is recommended to navigate these updates effectively.