B P Collins examines the significant changes affecting individuals announced by Chancellor Rachel Reeves in the 2024 Autumn Budget, highlighting their potential implications for personal finances moving forward.
Pensions to become subject to inheritance tax
- The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for inheritance tax purposes from 6 April 2027, which will affect around 8% of estates each year. This is a major, unexpected tax change. In practice this affects uncrystallised defined contribution (DC) pensions, crystallised DC pensions not invested in annuities, and lump sum death benefits from defined benefit (DB) pensions.
Inheritance Tax
- The inheritance tax thresholds were due to be frozen until April 2028. The government is extending these threshold freezes for a further two years to April 2030. This will result in a 21 year freeze on the Nil Rate Band allowance, and bring more estates into paying inheritance tax through ‘fiscal drag’. The Current Nil Rate Band allowance is £325k, and the Residence Nil Rate Band allowance is £175k.
- The government will reform Agricultural Property Relief and Business Property Relief from April 2026. The 100% rate of relief will continue for the first £1m of combined agricultural and business asset, with a new 50% rate thereafter. This means the government will effectively introduce a new 20% rate of IHT where combined APR and BPR assets exceed £1m.
- The government will reduce the rate of Business Property Relief to 50% for shares listed on the Alternative Investment Market (“AIM”). The effective rate of 20% will not be subject to the £1m cap, the tax rate will apply in full.
Capital Gains Tax
- The Budget increases the lower rate of Capital Gains Tax (CGT) from 10% to 18% and the higher rate from 20% to 24%. These new rates will match the residential property rates, which are not changing. These tax changes are immediate.
- CGT rates for Business Asset Disposal Relief and Investors’ Relief will rise gradually to 14% from 6 April 2025 and match the main lower rate of 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced to £1 million for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief. This will be legislated in Finance Bill 2024-25.
Domicile
- The government will abolish domicile as a concept and introduce a new residence-based system for Inheritance Tax (IHT) and legislate to abolish the remittance basis of taxation for non-UK domiciled individuals (“non-doms”), which will take effect from 6 April 2025. Individuals who opt-in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.
- From 6 April 2025 the government will be ending the use of offshore trusts to shelter assets from IHT.
Stamp Duty
- From 31 October 2024 the surcharge on Stamp Duty Land Tax (SDLT) will be increased by 2 percentage points from 3% to 5%. This typically applies to the acquisition of second homes.
If you’d like to discuss the impact of the Autumn Budget for you or your family, please contact B P Collins’ private client or property teams on 01753 889995 or email enquiries@bpcollins.co.uk.
