Autumn Budget 2024 Inheritance Tax Property Relief Cuts
Published / Last Updated on 08/11/2024
We have already covered the Chancellor’s attack on pensions by introducing inheritance tax on unused pensions and death in service benefits
Let’s have a look at other changes for inheritance taxes.
Nil Rate Band Allowances
The usual inheritance tax nil rate band (£325,000) and property nil rate bands (£175,000) and the ability to transfer unused allowances on death to surviving spouses/civil partners remain unchanged but these have now been frozen until April 2030. In addition, tapering of residence nil rate band will continue from the £2 million threshold. Indirectly, this means ever higher inheritance tax bills on our wealth and private homes.
Add to this, the Chancellor also attacked farmers and businesses.
Agricultural Property Relief and Business Property Relief
From April 2026, when you die and pass on agricultural property or business assets only the first £1million will now get 100% relief on the combined value of agricultural and business property rather than the whole value of agricultural property or business assets .
For qualifying agricultural property or business assets over £1 million, relief will be granted at 50%. Inheritance tax is 40% meaning an effective rate of 20%.
Business property relief will also continue for shares not listed on recognised stock markets such as AIM in addition to private/closed trading company shares.
Initial Thoughts
This is a big ‘kick in the teeth’ for farmers and business owners.
We are staggered at the attack on farmers when most farmers leave their assets to their children to continue the family business i.e., carry on farming and most farms will be valued at more than £1m. Every time a farmer passes, it may mean 20% IHT on anything over £1m. We need farmers to feed us. It would have been better to define better agricultural property to ‘working’ agricultural property to prevent those abusing the relief that are just buying up land and not ‘farming’ it.
Business owners may be reluctant to build their business now to a value worth more than £1m. What happens when a business owner dies, and the family are facing a 20% tax bill for values in excess of £1m? Will the business fold? Will the business have to be sold on to pay the tax bill with the risk of redundancy etc, by new owners? Again, a very strange move by the Chancellor.
- You should review your holdings in AIM shares.
- You should still plan as normal for inheritances taxes on wealth and property as values rise and allowances are frozen.
- If you are a business owner or farmer with business assets over £1m, you need to plan for the IHT bill now.
- Start gifting assets sooner.
- Start spending your wealth and pensions sooner.
