Autumn Budget: Considerations if you are Estate Planning

The much-speculated Autumn Budget has now been presented. If you are looking to start estate planning, here are the areas you need to be aware of.

Inheritance Tax (IHT)

The vast majority of estates do not currently pay IHT either because they are covered by spouse or charity exemption, are under the nil rate band (currently set at £325,000 where tax is charged at 0% and £175,000 for the Residence Nil Rate Band) or have transferable allowances available from a predeceased spouse’ estate and the surviving spouses estate is below £1 million.

The current nil rate band of £325,000 has been in place since 2009 and had been frozen until 2028. This level has now been frozen until 2030.

With the nil rate band frozen for an additional 2 years, it is likely that more estates will start becoming subject to inheritance tax. 

Capital Gains Tax (CGT)

Prior to the budget, Capital Gains Tax (the tax paid on any gains made from the sale of property/shares/chattels) rates were set at 10% for the lower rate and 20% for the higher rate for individuals. These rates have now increased to 18% and 24% respectively and the new rates are effective as of 30th October 2024. The estate and trust rates have remained unchanged and remain at 20% and 28%

The reliefs for home ownership have not changed and principle private residence relief (PPR) remains available. This relief is available to set against any capital gains on your principal residence. 

In addition to the PPR, there are two reliefs already available that offers access to a lower rate of CGT: Business Asset Disposal Relief and Investors Relief. The rate at which tax is paid on these is increasing to 14% from 6 April 2025 and will match the lower rate of 18% by 6 April 2026.

Pensions

At the present time, the majority of pensions are outside of an estate for inheritance tax purposes. 

The chancellor has announced that from 6 April 2027 any unspent pension funds and death benefits payable from a persons pension will now be included in the persons estate. 

This change will likely bring a much larger amount of estates into the IHT regime. 

Business & Agricultural Property Reliefs

For those that run businesses or farms, there is the ability to claim Business Property Relief (BPR) and Agricultural Property Relief (APR) on those assets within the business or farm. The previous rules were that provided the criteria was met then 100% of the assets were relieved from IHT (or 50% for assets owned by a business but not used for the purposes of the business.)

These rules have now been changed. As of 6 April 2026, the current rate of 100% will be able to be used for the first £1million of combined business and agricultural assets. The rate of relief for assets above £1million will be 50% and taxed at an effective rate of 20%.

For shares that are held on Alternative Investment Market and similar structures the rate will be reduced from 100% for BPR to 50% and taxed at an effective rate of 20%.

Domicile

The government has announced that they will be scrapping the concept of domicile status from the tax system and replacing it with a new residence based regime from 6 April 2025. This also includes ending the use of off-shore trusts

How can we help?

Estate planning involves determining how an individual’s assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual’s properties and financial obligations in the event that they become incapacitated, along with other considerations such as the guardianship of minor children and even pets.

Our Wills & Probate team specialise in this area and include solicitors who are members of the Society of Trusts & Estate Practitioners (STEP), and the Association of Lifetime Lawyers. They are perfectly placed to help guide you through the impact of the Autumn Budget and what you can do to ensure that your assets are protected.

To book an appointment at either or Cardiff or Newport office, please contact us today.