- 09 Dec 2024
- •
- 3 min read
Key updates from the Autumn Budget: Inheritance Tax, Capital Gains Tax, and Property Reliefs
The recent UK Budget introduced significant changes to the tax landscape, affecting inheritance planning, property reliefs, and capital gains taxation. These updates underscore the importance of reviewing estate plans and understanding how these shifts may impact your financial future.
Capital Gains Tax: increased rates
The highly anticipated change to Capital Gains Tax was delivered, with the Chancellor confirming that the lower rate would increase from 10% to 18%, while the higher rate has increased from 20% to 24%. This adjustment makes it even more crucial for individuals to carefully consider the timing and structure of asset disposals.
Inheritance Tax: thresholds frozen and pensions included
Inheritance Tax (IHT) thresholds, including the Nil Rate Band (£325,000) and the Residence Nil Rate Band (£175,000), have been frozen until 2030. This means that the first £325,000 of any estate can still be inherited tax-free until then. If a residential property is included in the estate, then an additional £175,000 can also be inherited tax-free. After this, estates will still be taxed at 40 per cent.
Reeves in her Budget announcement anticipated that only 6% of estates will be subject to IHT, however with the recent rates of inflation, and property prices continuing to rise, it is conceivable that percentage may in fact be higher.
Also, the Chancellor also announced that inherited pensions will be considered within an Estates value for Inheritance tax from April 2027. The detail on this has yet to be released, but this has the potential to amount to a very significant change for individuals who thought they could pass pensions to their loved ones with reasonable tax rates.
Agricultural and Business Property Relief: New caps introduced
The Budget also saw significant changes to the Agricultural Property Relief (APR) and Business Property Relief (BPR). Previously, Agricultural property which qualified for APR attracted a 100% relief from Inheritance tax. Some Business property which attracted the relevant BPR were eligible to apply a 50% to their taxable Estate, or 100%, depending on the circumstances. The value of the Agricultural Property or Business Property that could attract the relief, was not capped.
After the announcement of the Budget, the reliefs will be combined to produce a £1 million flat relief across APR and BPR. This will mean that the relief can only be applied up to the value of £1 million, and the value of the property over £1 million will be subject to an 20% Inheritance tax rate.
This could cause significant problems for those inheriting such assets, and has a significant impact on the farming community, especially after the promise that Labour had no intention of fiddling with APR designed to protect the family farm. Farmers in their response have argued that if they cannot afford to pass their business down to relatives, their family farm will die out, and so it is important now more than ever to get specialist advice.
Planning ahead: seek specialist advice
The changes outlined in by the Budget will of course cause worry, especially for those who have already invested time and expense that often goes into estate planning and also by people wishing to leave gifts to their family and others after they’re gone.
Our team of specialists are experts in estate planning, and we would be more than happy to guide you and discuss estate planning with you.
If you would like to discuss your estate planning, please get in touch with our team on 0800 2800 421.
Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
