2024 Budget summary from the Private Client Team
Rachel Reeve’s recent budget has produced many changes, some anticipated, some unexpected. The majority of these proposals are still declarations of policy, which will be subject to consultation before legislation is passed.
Inheritance Tax
The Chancellor has chosen not to alter the individual Nil Rate Band for Inheritance Tax from £325,000. This figure has been static since 2009/10 and is unaligned with inflation. Likewise, the residential allowance of £175,000 also remains frozen.
Ms Reeve however announced the reform of agricultural property relief and business property relief from 6 April 2026. Relief of up to 100% has always been available on qualifying business and agricultural assets in addition to existing nil-rate bands and exemptions. However, from 6 April 2025, the 100% rate of relief will only apply for the first £1 million of combined agricultural and business property and it will be 50% thereafter.
The policy paper addresses those considering making immediate lifetime gifts in response to this planned change, as it states that the new rules will apply to lifetime transfers made on or after 30 October 2024, where the donor dies after 6 April 2026.
The significance of the changes in these reliefs on death is huge. The need to pay IHT on death at 40% upon agricultural property and trading businesses will impact heavily on farming families, business owners their heirs and employees.
An amendment has been made to the eligibility for Business Property Relief on shares held in unquoted trading companies, if held for 2 years historically these could potentially attract 100% IHT relief. For these purposes, it seems that shares will still be “unquoted” if they are listed on a stock exchange which is not designated as a “recognised” stock exchange. The Alternative Investment Market (or AIM) is not a “recognised” exchange; so holding a portfolio of shares quoted on AIM has been a recognised estate planning tool.
However with effect from 6 April 2026, relief on shares in trading companies not listed on a recognised stock exchange will qualify for 50% relief only (and without the £1,000,000 allowance). It would appear that, this is intended to include only shares which are listed, even if on an exchange which is not “recognised”, so the £1,000,000 allowance should still be available for shares in privately held trading companies – although this is not entirely clear.
The Chancellor has stated that unused pension funds on death, as well as death benefits payable from pension schemes, will now be taxed on death. At present, generally funds built up in a pension scheme that had not been used to provide a pension in life would not be taxed on the contributor’s death. The current proposal appears to be that from 6 April 2027 these residual funds held within a registered pension will be subject to inheritance tax on the contributor’s death. The responsibility for reporting and paying the tax due will be with the pension scheme administrator, however if this is not done within 12 months of death the responsibility passes to the beneficiaries of the deceased’s estate.
One piece of good news is that the scope of Agricultural Property Relief will be extended from April 2025 to include land managed under specific government approved environmental schemes or those run by public organisations or approved bodies.
Capital Gains Tax
The main rates of capital gains tax (CGT) increase from now, with the lower rate of 10% rising to 18% and the upper rate from 20% to 24%. The rates for residential property remain at 18% and 24%. The lifetime amount of gains eligible for business asset disposal relief remains at £1,000,000, although CGT payable on such gains will increase from the current 10% to 14% in April 2025 and 18% in April 2026.
Stamp Duty Land Tax
The SDLT rate for purchasing a second property has increased to 5%.
While this is just a brief overview of significant upcoming changes, it is clear that these reforms will have a considerable impact. Those who had anticipated benefiting from Agricultural Property Relief or Business Property Relief—or who have spent much of their lives building their pension funds for a planned income level—should now consider their pensions and estate planning options carefully and seek immediate advice.
We work with a variety of accountancy firms and financial advisers and would be happy to assist with any recommended adjustments to estate planning in response to these reforms. This might include lifetime gifts, declarations of trust, or the preparation of new Wills.
Our friendly team of experienced solicitors offer a tailored approach to your legal requirements. From planning for the future to dealing with the death of a loved one, Rogers & Norton provide a sensitive and personalised service. For more information, visit our Wills, Trusts and Probate services page, or contact us by calling 01603 666001 or emailing enquiries@rogers-norton.co.uk