Family Law
The Autumn 2024 budget is finally here!
The most anxiously anticipated budget in some years. Here is our summary of the main points from the autumn budget for our clients and considerations for next steps.
Capital Gains Tax
The Capital Gain Tax news we have all been waiting for; Capital Gains Tax (CGT) will rise immediately.
- Lower rate of 10% will rise to 18% and higher rate will rise from 20% to 24%.
- The annual CGT personal allowance remains at £3000 for individual and £1500 for trusts.
- There continues to be no CGT on the sale of your primary residence but for additional properties it increases to 24% at the higher rate.
Inheritance Tax
Inheritance Tax (IHT) is one of the most emotive tax topics in the autumn budget and the new measures will bring more estates into the net.
- The current IHT nil rate band and residential nil rate band provisions will be frozen until 2030. That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1m when a tax free allowance is passed to a surviving spouse or civil partner.
- Shares on the AIM market will only attract IHT relief at 50% reduced from 100%.
- From April 2026, the first £1 million of combined business and agricultural assets will be exempt from IHT. The value in excess of this £1 million, will be subject to IHT at 50% of the prevailing rate.
- Inherited pensions will be brought into scope for inheritance tax from April 2027
Private Schools
The scrappage of VAT allowances for private schools will start from January 2025. This will be followed by the removal of business rates relief.
Business NI
Businesses and business owners have the heavy burden of increased employers NI (national insurance) from 13.8% to 15% from April 2025.
Property
Second homeowners also face a bigger tax bill. Starting 31 October 2024, there will be a 2% rise in the stamp duty land surcharge, taking the new rate to 5%.
How does the autumn budget impact me and do I need to change my Will?
It’s hard to be precise at this very early stage and without having access to the more minor details. However, our initial thoughts are that if you are a business owner or own agricultural land and either/both of which would have qualified for Business Property Relief (BPR) or Agricultural Property Relief (APR), you might wish to review the contents of your Wills. In this scenario, it is quite common for Wills to incorporate what are often known as “BPR/APR Discretionary Trusts” (the Trust). The Trust may stand to inherit your assets which qualify for either BPR/APR if you die before your spouse/civil partner.
If this is the case, the wording of the gift to the Trust is important and should be reviewed. Sometimes, the Trust will receive assets that qualify for APR/BPR at a rate of 100% and/or 50%. If your business/agricultural assets are now valued at over £1m then the value over and above this will, under the new rules, only attract relief at a rate of 50% – not 100%.
As such, if the Trust inherits all of your business/agricultural assets and the combined value of the same is over £1m, this could trigger an Inheritance Tax liability on your death at a new effective rate of 20%.
With that in mind, depending on the current value of your business/agricultural assets and the likelihood that this will ever exceed £1m, it might be worth ensuring that only business/agricultural assets attracting 100% relief (i.e. up to £1m in value) is passed into the Trust. The rest (those that only qualify for 50% relief) could pass to your surviving spouse/civil partner along with the Residue of your estate and benefit from Spouse Exemption. This will result in no Inheritance Tax liability arising.
If you would like to discuss this further please contact Jessica Partridge (Tax and Trusts) or Matt Parr (Private Client Wealth).