Commonly portrayed as a tax on the wealthy, Fiscal studies indicate around about 4% (2020/2021) of estates pay Inheritance Tax but projected figures indicate this will increase to around 7% of estates by 2032. Inherited wealth is growing, and more estates will be impacted by this tax. Tax planning has never been more important.
This Budget brings the biggest changes to taxation on death since the introduction of the Residence Nil Rate Band in 2017. We highlight below Labours legacy.
Changes in the Autumn Budget
- The Nil Rate Band exemption is available to all estates, at £325,000 and will remain frozen at this level until 2030.
- The Residence Nil Rate Band is available to those leaving their homes to their direct descendants, at up to £175,000, will remain frozen at the same level until 2030.
- Pensions have had favourable treatment of tax relief on contributions, tax-free growth, and were outside the Inheritance Tax on death. Inherited pension benefits will now fall within the estate assets subject to Inheritance Tax from April 2027 at the standard rate of 40%.
- Where a death is after the age of 75 and there are pension benefits, as well as the Inheritance tax, income tax may also be payable on that pension, potentially raising the tax on death on those pension benefits to a combined total of 67%.
- Reforms to Business Relief (BR) and Agricultural Property Relief (APR), which currently gives 100% relief on shares in Private Unlisted companies and Farming Businesses, will change from April 2026. The first £1M will still have relief of combined BR and APR but any value over that will have relief at 50%. Planning ahead for many small to medium businesses may prevent the need to sell off business assets to fund an Inheritance Tax bill.
- Investment in AIM (Alternative Investment Market) portfolios, currently under the BR regime and commonly used as part of tax planning will fall foul of the reforms above, and will no longer have 100% relief from Inheritance Tax from April 2026.
- Abolition of the non-domicile regime from 6 April 2025 was confirmed. There are many Non-Doms residing in this country and currently their Inheritance Tax status is dictated by their domicile, meaning their UK assets do not pay Inheritance Tax. The change will mean that a residency-based test will dictate if they are a long-term residence for Inheritance Tax in relation to their non-UK assets. IHT treatment of non-UK assets held in a Trust will be based on the Settlors residence not at the time the asset went into the Trust but at the time of the Inheritance Tax charge.
Will any of these measures impact you?
The October 2024 budget has reminded us that, while tax policy can shift, smart planning remains timeless. Reviewing your estate planning goals with a fresh lens can save you—and your loved ones—future stress and tax obligations.
As always, estate planning isn’t just about what you leave behind; it’s about creating a legacy that aligns with your values and aspirations. If you’ve got questions about what the latest IHT changes mean for you, don’t hesitate to reach out. Whether it’s gifting strategies, trust restructuring, or simply updating a Will, we’re here to ensure your planning aligns with the latest rules—and with your goals for the future.
If you’re concerned about the way the budget will impact you, get in touch with the experienced team at Hanne & Co – we can help you plan your next steps and actions.
Get in touch with our Private Client team on +44 (0) 207 228 0017 or via the form below.
Contact our property team today to discuss any of the above in more detail by submitting the form below.
"*" indicates required fields
