The 2024 Autumn Budget, announced on 30 October, introduced changes that will have a significant impact on tax and estate planning strategies.
What tax changes have been announced?
Capital Gains Tax (CGT)
It was expected that there would be a rise in Capital Gains Tax, Reeves said:
“they will keep UK rates relatively low by international standards. And it will raise a relatively modest £2.5bn by the end of the parliament.”
CGT rates will increase – the basic rate rises from 10% to 18%, and the higher rate from 20% to 24%. Although, there will be no increase on the 24% rate for second properties. The new rates apply for disposals on or after 30th October 2024 but there are anti-forestalling rules to apply to new rates where contracts were exchanged but not completed before the budget day.
Inheritance Tax (IHT)
- The Government will extend the freeze on the Inheritance Tax threshold, maintaining the current nil rate band of £325,000 and residence nil rate band of £175,000, with the related tapering starting at £2 million are to be retained until April 2030.
- There will be £2 billion in tax raises from reforms to assets attracting business and agricultural property reliefs. The current 100% relief will only apply for the first £1 million of combined business and agricultural assets and above that level, 50% relief will apply, meaning that IHT of 20% will be charged.
Key tax and estate planning considerations
- Review of existing Wills: It is important to review your Wills to ensure they remain tax-efficient under new rules.
- Assess tax efficiency: Review the tax efficiency of assets within the estate, such as pensions, investments, and property rentals.
- Exploring IHT mitigation strategies: Including the use of Trusts, gifts, and other wealth transfer structures.
- Evaluate assets: Evaluate and assess the impact of the changes to the IHT allowance relating to business and agricultural assets. For business owners, review and potentially speed up succession plans.
- Bear in mind the IHT threshold: Consider the long-term effects of the frozen IHT threshold as asset values rise over time
- Trust arrangements: Weigh up the advantages of setting up or adjusting trust arrangements, particularly Discretionary Trusts, which may offer tax benefits.
A Discretionary Trust (DT) can be a useful tool for tax and succession planning when transferring shares. In a DT, trustees selected by the trustor manage the trust’s assets and determine distributions to beneficiaries named in the trust deed.
Transferring shares that qualify for business relief (BR) from IHT to a DT, if completed correctly, can avoid incurring an IHT charge. While CGT may apply, it can be deferred through holdover relief. If CGT rates increase, transferors might opt to pay CGT at current rates on selected or all gifted shares.
How can we help?
Amanda Voakes is a Partner in our expert Wills and Probate team, advising on IHT planning, Wills, administration of estates, grants of Probate, grants of Letters of Administration, Powers of Attorney, administration of affairs, and residential care fee planning/protection of assets.
Amanda is an accredited member of The Association of Lifetime Lawyers (formerly known as Solicitors for the Elderly or SFE) which is a membership body for legal professionals. Members of the group are the most qualified lawyers in the country when it comes to supporting older people and those in vulnerable circumstances who may need extra help and support. Lifetime Lawyers receive expert training and best practice guidance to offer the very best advice.
It is advisable to always take professional advice from an accountant concerning CGT. Once an accountant has confirmed the CGT position, our team can assist with the legal drafting of documentation.
If you have significant estates or business interests, we advise you to seek guidance on these changes so you can ensure you still benefit from the changes and mitigate tax exposure. We advise you to speak with an accountant about CGT , Business Asset Disposal Relief, and Business Property Relief if you need general advice.
If you require any legal advice on the above subjects, please contact Amanda or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.
Contact us