The 2024 Autumn Budget was delivered by Chancellor of the Exchequer Rachel Reeves on October 30, 2024. The budget was the first from the new Labour government and was described as a budget to “rebuild” Britain.
There were significant changes to Inheritance Tax
What is Inheritance Tax?
Inheritance tax is the charge on the property, possessions and money on the Estate of someone who has died. Up until October 2024, it was charged at 40% for anything above a £325,000 threshold.
This means that it is only charged on the part of the estate that lies above the threshold. For example, on an estate worth £335,000, the tax would apply to the additional £10,000.
The chancellor announced that this £325,000 threshold will now remain in place until 2030. If someone inherits an estate, the tax that is claimed must be paid by the end of the sixth month after the person's death, otherwise interest is charged too.
What were the changes to inheritance tax?
The Autumn Budget introduced notable changes to Inheritance Tax (IHT) aimed at increasing contributions from wealthier estates.
Chancellor Rachel Reeves stated that a series of changes to inheritance tax rules will raise £2bn a year more for the government. It currently raises about £7bn a year for the government.
Are there any inheritance tax exemptions and allowances?
There are several exemptions to inheritance tax law:
- You can pass a home to your spouse or civil partner when you die, and there is no Inheritance Tax to pay.
- If the person who dies leaves their home to their children or grandchildren, the threshold goes up to £500,000 with the inclusion of the Residence nil rate band (RNRB) of £175,000.
- Estates that are valued at less than £325,000 (now fixed until 2030) are exempt.
- Gifts to charities are entirely exempt from IHT regardless of the value of the gift. While the 'headline' rate of IHT is 40%, your estate will be charged a reduced IHT rate of 36% by leaving at least 10% of the taxable value of your estate to charity.
Married or civil partners can transfer assets to one another tax-free, and any unused inheritance tax allowance from one partner is automatically passed to the surviving partner.
This means that the estate of someone who can use their late partner's allowance, and leaves a home to their children or grandchildren, won't be liable for inheritance tax on anything under £1m.
What were the changes to Inheritance Tax for farmers?
For the first time, the measures include applying the tax to inherited agricultural assets worth more than £1m. This move has prompted anger among farmers.
Up until October 2024, small family farms (including land used for crops, rearing animals, housing farm buildings, cottages and houses) have been handed down to the next family generations and haven’t needed to pay inheritance tax.
But just as is for the rest of the population, in the new IHT law, there would be no inheritance tax payable on the first £325,000 above that limit, bringing the untaxed total to £1.325m.
And any tax due on the portion above that limit of £1.325m would be 20% - half the usual rate.
And there are exemptions. If a farmer is married, they would be able to pass assets to their spouse tax-free, or to leave a main house/residence to children or grandchildren.
The government says the changes will only affect the wealthiest 500 farms each year.
Were there any other IHT changes in the budget?
Yes, the chancellor also announced changes to inherited pensions. At present, inherited pensions are not counted for inheritance tax purposes, but will be included from April 2027, and any unused pensions benefits exceeding available IHT thresholds would form part of your taxable estate, unless the IHT exemption on transfers to a spouse or civil partner applies.
What does that mean for pensioners?
Law firms have seen a surge in enquiries from pensioners that want to ensure that their pensions are left to their children before the IHT rule applies.
Get legal advice on Inheritance Tax
Contact Taras Tymofijiw, Tax Executive for expert legal advice on wills, probate, Inheritance Tax planning, powers of attorney, trusts and Court of Protection matters.
Making the best provision for your family or your business now and in the future requires careful financial planning involving Wills and Trusts.
At Coles Miller we have an experienced team of solicitors and legal advisors, based in Poole, Bournemouth, Broadstone, Christchurch and Wimborne who specialise in matters associated with Wills and Probate.
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A recap of some of the announcements from the 2024 Autumn Budget includes:
Benefits increases
The Basic State Pension will increase by 4.1% from April 2025 to April 2026. Carer's Allowance will be available in England, Wales, and Northern Ireland.
Energy Profits Levy
The Energy Profits Levy (EPL) rate will increase from 35% to 38% and will be extended until March 31, 2030.
Company car tax
The government will set Company Car Tax (CCT) rates for 2028-29 and 2029-30.
Car ownership arrangements
The government will publish draft legislation to close loopholes in car ownership arrangements.
Investment Zones and Freeports
The budget confirmed funding for Investment Zones and Freeports across the UK.
Decarbonisation Investment Allowance
The rate of the Decarbonisation Investment Allowance will be adjusted to 66%.
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