How will the budget affect Inheritance and other taxes this Autumn
Speculations about the UK’s 2024 Autumn Budget are rising. On 30 October, the Labour government is expected to introduce far reaching changes to our taxes. The government’s reform of the tax system will be aimed at addressing economic challenges the UK finances have been facing. Just to name a few possible changes, the Lord Chancellor could decide to amend income tax, capital gains tax, inheritance tax, stamp duty and private pension tax reliefs.
The tax changes could affect employees, property investors and how estates are taxed on death. Let’s focus on the latter topic by discussing how inheritance tax (IHT) might be changed.
There are discussions around raising the IHT rate, which is currently 40% or lowering the nil-rate bands. Presently, estates valued below £325,000 are exempt from IHT, and an additional £175,000 is available when passing a family home to descendants. If a deceased gives their estate to their surviving spouse, a combined £1,000,000 could be claimed in IHT relief before the excess value gets taxed at 40%. Adjustments to these thresholds could mean more estates becoming liable for IHT. As a result, more people will become affected by IHT.
Another possibility is tightening Potentially Exempt Transfers (PETs), which allow certain gifts to escape IHT if the donor survives seven years. Restricting or abolishing PETs would make large financial gifts more costly.
One key proposal under consideration is removing or restricting Agricultural Property Relief (APR) and Business Property Relief (BPR), which currently allow agricultural assets and business properties to pass down without incurring the full IHT. If these are abolished or reduced, it could significantly impact family-owned farms and businesses.
If we add potential changes to capital gains tax (CGT), dying or being alive could prove to be more costly under the new government. Changes to the tax system encourage many of us to check in with their solicitor.Make sure to plan your taxes in advance and contact our specialists in the life planning department for wills and probate.
