Autumn Budget 2024: How inheritance tax and capital gains changes could affect you

Following the July 2024 election, the Autumn Budget has introduced anticipated changes to inheritance tax and capital gains tax calculations. Here’s a breakdown of the key changes, what they mean for your financial planning, and tips on making the most of available reliefs..

Inheritance Tax

The threshold (Nil Rate Band) for inheritance tax, currently set at £325,000, has been frozen until 5^th April 2030. Married couples who pass everything (including a primary residence), to each other and then to their children upon the second death, can benefit from a combined Nil Rate Band of £1million before paying inheritance tax.

In practice this will mean that with rising house prices, more and more people will pay inheritance tax in the coming years. The Institute of Fiscal Studies confirmed that in the year 2020-21, 4% of estates paid inheritance tax. However, it is anticipated that by 2032-33, 12% of people will pay inheritance tax either on their death or the death of their spouse.

Business Property Relief and Agricultural Property Relief 

There is currently relief of up to 100% on qualifying business and agricultural assets. This will change from April 2026. This 100% rate of relief will continue for the first £1million of combined agricultural and business property, and will be 50% thereafter, making the effective rate of tax above this cap 20%.

Private Pensions

From April 2027, unused private pensions and death benefits will be brought into the scope of Inheritance Tax. Traditionally, they were exempt provided they were structured correctly. This will mean a fundamental shift in how individuals think about accessing their money in retirement and how we approach tax planning.

Capital Gains Tax

The main rates of Capital Gains Tax have now increased. The basic rate for non-residential property gains has been increased from 10% to 18% and the higher rate has increased from 20% to 24% for higher rate tax payers. These increases bring the rates in line with those for residential property. These changes apply to disposals on or after the 30^th October 2024.

What does it mean for you?

These changes make tax planning more crucial than ever. Whether you want to preserve your estate for your loved ones or structuring your pension funds, careful planning can make a key difference in how much tax you pay. At Hamers, we’ll help you make the most of all available exemptions and reliefs.