Autumn Budget 2024 – What does this mean for you?

By Jamiel Zaman

Solicitor

12 November 2024

Article Insights

On the 30^th October 2024, Rachel Reeves presented her first and much anticipated budget as chancellor, we will look at some of the key takeaways in more detail below.

Inheritance tax (IHT)

There was a lot of speculation around the IHT thresholds and how they may change following the budget, with many questioning the fairness given that if as an individual you are not married and have no children you are limited to an allowance of £325,000.

The current position with IHT is that you are charged 40% on the value if your estate over the Nil Rate Band (NRB) which is £325,000.

You can qualify for a further allowance of £175,000 which is the Residence Nil Rate Band (RNRB). To qualify for this your direct descendants must inherit a qualifying residence.

Both the allowances can be doubled when the surviving spouse passes away if on the first death the whole estate was spouse exempt.

Currently there is also 100% relief on business and agricultural assets which qualify for Business Property Relief (BPR) or Agricultural Property Relief (APR). There is no cap on the value of assets to which the reliefs apply. Both APR and BPR were designed to ensure that farms and businesses can be passed down in the family from one generation to another.

The current position with Pensions is they are generally outside the estate for IHT purposes. A lump sum death benefit is also outside of the estate provided that the recipient is chosen by the trustees of the pension under a discretionary trust.

NRB and RNRB thresholds

In the Budget Rachel Reeves confirmed that the existing NRB and RNRB thresholds will be frozen for a further two years until 2030. However it is important to note that the NRB has not changed since 2009.

The RNRB was introduced in 2017 at £100,000 and increased by £25,000 each tax year until 2020 where it reached £175,000 and has remained at this figure since.

It is also important to note the taper rate of the RNRB. The RNRB is tapered at a rate of £1 for every £2 the estate is over the £2,000,000.

Many still feel that given the modern blended families in the UK people are being penalised for not wanting to get married or enter into a civil partnership and for not having children.

Given the rate of inflation many families will feel they are worse off as a result of the frozen NRB.

APR and BPR

As mentioned above, currently there is 100% relief on business and agricultural assets which qualify for APR or BPR. this is due to end in April 2026.

As of April 2026, 100% relief will only continue to apply to the first £1,000,000 of APR and BPR assets combined. Anything over £1,000,000 will qualifying for 50% relief only.

However assets currently qualifying for 50% relief will remain subject to that rate and will not use up any of the £1,000,000 allowance. This means that the £1,000,000 allowance is subject to assets which qualify for the full relief and is not used up by assets which qualify for 50% relief.

Example

If an individual owns £1,500,000 of shares qualifying for BPR, the first £1,000,000 of those shares would attract 100% relief, and the remaining £500,0000 would be subject to IHT of £100,000.

As a result of the Budget, estates will be able to continue to benefit from the NRB, RNRB, spousal exemption and charity exemption.

One key difference is that the BPR and APR allowances are not transferable on death unlike the NRB and RNRB. 100% relief will only apply to the £1,000,000 and then 50% relief on the amount above this.

From April 2026, Non-listed investments such as AIM shares will also only qualify for 50% relief instead of the full 100% relief.

Lifetime Gifting

There have been no changes to this, each individual still has an annual allowance of £3,000 and the seven-year rule still applies to any gifts over the annual exemption.

Pensions and IHT

From April 2027, there will be no IHT relief on pensions. This is regardless of whether or not the unused pension funds are held in a discretionary trust as is the current case.

It is important to note, pension providers, rather than the deceased’s personal representatives, will be responsible for sending HMRC the funds to pay the IHT on the unused pension.

The balance of unused pension funds once pension providers have paid the IHT will remain subject to income tax on withdrawals.

If a death benefit counts towards an estate, it does not automatically mean that IHT is payable as it will need to be above the NRB allowance before any tax is paid.

Capital Gains Tax (CGT)

There are new rules for CGT which took place immediately. CGT has increased from 10% to 18% at the lower rate, and 20% to 24% at the higher rate.

While the main rates of CGT were increased, the residential property surcharge was not. This now brings tax on assets like shares and managed funds in line with property gains.

Stamp Duty Land Tax (SDLT)

From the 31^st October a higher stamp duty rate on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential properties will now be 5%. The surcharge applies in addition to the standard residential rates of SDLT.

The lowering of the first-time buyer nil-rate stamp duty threshold from £425,000 to £300,000 will take place from April 2025, and for non-first-time buyers there’s a reduction of the threshold from £250,000 to £125,000.

Non-Domiciled Tax payers

There are no immediate changes here but from April 2026, the current non-domicile tax regime will be replaced with a new residence-based system.

If you are would like to discuss anything mentioned in the article above, or another aspect of private client work, please reach out to our Private Client team by filling out an enquiry form on our contact page.

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Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.