Changes to Inheritance Tax in the Budget

Written by Claire Thompson | Private Client Team | 30 October 2024

Although there have been whispers of changes to inheritance tax for quite some time in today’s budget these whispers became a reality as Chancellor Rachel Reeves has now outlined several changes to inheritance tax as part of a wider push to raise revenue.

Pensions

Currently if your pension pays directly to nominated beneficiaries (rather than into your estate) it passes free from inheritance tax. From 2027, the value of your pension will be subject to inheritance tax regardless of whether it passes to into your estate or directly to your beneficiaries.

Agricultural and Business Property Relief:

At the moment any assets that attracted agricultural property relief pass free from inheritance tax. If assets attract business property relief, they also generally pass free from inheritance tax (although in certain circumstances they only attract a 50% relief).

In the budget it was announced that from 2026, there will be an allowance of £1,000,000 for agricultural and business property relief (which means the first £1,000,000 of assets attracting these reliefs pass free from inheritance tax). The excess over this will attract a 50% inheritance tax relief (so to all extents and purposes will be taxed at 20%).

AIM Shares:

There will also be changes to shares on the Alternative Investment Market. This type of shares currently pass free from inheritance tax as long as the deceased owned them for 2 years ending with their date of death. When the rules change, AIM shares will only attract a 50% relief from inheritance tax.

Summary

The ‘small print’ of these changes is not yet known but our private client team are already considering alternative options to mitigate inheritance tax and assist our clients with effective and practical tax planning options.

If today’s budget has taught us anything it is the importance of reviewing your Will and getting tax planning advice!

If you’d like to speak to the team and get their help, please contact us by calling 01752 827067 or emailing wills@nash.co.uk. We’d love to talk through your situation and see how we can help you with your tax planning options.