26/11/24
It’s good practice to revisit your Estate Planning every 12 months, to ensure it’s still in line with your own life circumstances; this becomes even more pertinent in the light of any Government changes or proposals which may undermine your existing provisions.
Changes in legislation can mean the plans you have in place may no longer be as tax efficient as they once were when first drafted. This is particularly relevant for Inheritance and Capital Gains Tax allowances.
Budget changes can also have implications for your pensions, and any Business Relief or Agricultural Relief you may be entitled to.
Following the announcement of the Government’s Autumn 2024 Budget by Chancellor Rachel Reeves, here’s an overview from CTT Private Client of the changes that will most likely affect your current Estate Planning strategies.
You can always get in touch to find out more about our tax-efficient planning and how our personalised approach ensures you have the most up-to-date solutions in place for you and your loves ones.
Inheritance Tax
The Nil Rate Band (NRB) and Residence Nil Rate Band) RNRB have been frozen at £325,00 and £175,000 respectively since 2009. In light of the recent Buget, these figures look set to remain until 2030.
The NRB and RNRB give homeowners a combined tax-free sum of £500,000 (£1,000,000) for married couples, allowing them to pass on property and assets to their children to that value before their estate is subject to Inheritance Tax (IHT) at 40%.
Freezing the NRB and RNRB will mean an increasing number of people are subject to IHT as property prices rise in the coming years in line with inflation. This has long been the case.
As of April 2027, however, significant changes to the treatment of pension savings will mean any ‘unspent’ pension will also contribute towards and individual’s IHT allowance, pushing considerably more people over into the 40% IHT threshold.
Up until now, funds held in private pensions weren’t considered part of the estate. This upcoming change, which also includes any death benefits derived from pension arrangements, is especially significant for those with high-value pensions and individuals with property and business portfolios.
With the inclusion of pension savings, a greater number of estates will be taken over the £2m limit where RNRB relief is reduced; on estate over £2.35m, there is no RNRB available at all.
If you have built up a significant pension pot or have concerns about how the new rules regarding IHT and pension will affect you, contact CTT Private Client to review and assess your current pension strategy and minimise liabilities.
Agricultural Relief (AR) and Business Relief (BR)
From April 2026, changes to Business and Agricultural property Relief will mean estates incorporating farmland and buildings will no longer be exempt from IHT. Under the new rules, IHT will be payable on business and agricultural assets totalling in excess of £1m.
This is a combined lifetime allowance for assets qualifying for 100% AR and BR; assets over this are payable at 50% of the death rate.
Multiple Trusts established by the same settlor before 30 October 2024 will each continue to benefit from this entitlement, while those set up post Budget will have to share this entitlement between multiple Trusts.
CTT’s Private Client team have dedicated Tax & Trust specialists. We excel in the drafting of Trusts and offer personalised insights into the best, most tax-efficient Trusts to suit your circumstances. Speak to a member of the Private Client team today to find out more.
Capital Gains Tax (CGT)
Capital Gains Tax (CGT) applies to profits earned through the sale of assets, such as second homes or investments, which have increased in value since their initial purchase.
In the recent Budget, the Chancellor announced a higher rate of Capital Gains Tax on profits from non-residential property sales. Under the new rules, capital gains tax for basic rate taxpayers will rise by 8%, increasing from 10% to 18%. For higher rate taxpayers, the rate will increase by 4%, from 20% to 24%.
With the annual CGT allowance remaining the same at £3,000 per person, this means there is limited offset available to counter these higher rates.
Non-Domiciled Tax abolition
The Non-Domiciled Tax Regime allowed UK-based individuals with international income streams to limit their UK tax liabilities. This regime has been abolished under the new Budget, which will have a significant impact on individuals with overseas interests.
In conclusion
While it’s important to be aware of these changes and how they may affect your current Estate Planning strategies, it’s equally vital not to rush into making decisions or amendments.
With the expert guidance of our Private Client team, you benefit from extensive Estate Planning, IHT, and wealth protection expertise. We’ll assess the effects of the recent budget, explore further opportunities for tax mitigation, and help you realign your planning to fit with current legislation and continue to meet your goals.
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