ICAEW.com works better with JavaScript enabled.

Autumn Budget makes significant changes to inheritance tax

Author: ICAEW Insights

Published: 30 Oct 2024

The government has announced that the inheritance tax (IHT) nil rate band will be fixed for a further two years, business property relief (BPR) and agricultural property relief (APR) will be reformed and the exemption for pensions will be removed.

IHT nil rate band

Currently, IHT is payable on gifts made by a person up to seven years before their death. IHT is charged where the value exceeds their available nil rate band (£325,000) at the date of the gift.  The amount of the nil rate band has been £325,00 since 6 April 2010, but has been supplemented by the residence nil rate band since 6 April 2017. 

At the Autumn Budget, the government announced that the following will be fixed until 5 April 2030:

  • the nil-rate band at £325,000;
  • the residence nil-rate band at £175,000; and
  • the residence nil-rate band taper, starting at £2m.

Changes to APR and BPR

APR currently allows a person to pass on the agricultural value of some property in the UK free of IHT. This includes land or pasture used to grow crops or rear animals and farm buildings where all of the conditions are met. 

Assets that may qualify for BPR include: a business or an interest in a business; land, buildings or machinery used in a business; and shares in an unlisted company. Where BPR is available, the value of an asset can be reduced by 50% or 100% when working out the IHT due. 

However, at the Budget, it was announced that the government will reform APR and BPR from 6 April 2026. The 100% rate of relief will continue for the first £1m of combined agricultural and business property, falling to 50% thereafter. The rate of BPR will also fall to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.

Assets that currently only qualify for 50% BPR will not use up the £1m allowance.

The £1m allowance will also apply to trusts. In addition, the new rules will apply to lifetime transfers on or after 30 October 2024 where the donor dies on or after 6 April 2026.

Responding to the Budget announcement about changes to inheritance tax reliefs, Frank Haskew, Head of Taxation Strategy, said: “Ahead of the Budget, ICAEW had called on the government to ensure that capital taxes support long-term business investment. We said that while any alteration of the IHT regime is a political decision for the government, it should be mindful of ensuring that changes do not adversely impact investment in, or the development of, SMEs. IHT also affects succession of family businesses, an important segment of the UK economy and of communities across the country.  

“These changes will affect a number of family businesses with valuable property. Furthermore, the decision to restrict the rate of BPR on AIM shares is likely to have an impact on the AIM market and restrict the availability of finance for smaller, growth-oriented companies.”

Exemption for pensions

The government further announced that, with effect from April 2027, most unused pension funds and death benefits will be included within the value of a person’s estate for IHT purposes. This removes an exemption that could have saved IHT of up to 40% of the value of the pension fund.  

HMRC has also launched a technical consultation on the processes required to implement these changes for UK-registered pension schemes.

Non-domiciled individuals

ICAEW has set out the changes affecting non-UK domiciled individuals in a separate article: Budget updates on manifesto commitments

Digitalisation

The government announced investment of £52m to digitalise the inheritance tax service from 2027/28. This will be welcomed by many as there is no existing digital service.

ICAEW’s Budget webinar

To learn more about the measures discussed above, and other changes announced at the Budget, join members of the Tax Faculty at the Budget webinar on Friday, 1 November 2024. Attending the webinar could contribute up to 1.5 hours of verifiable Continuing Professional Development (CPD), providing you can demonstrate that the content is relevant to your role.

Further information

 

Budget 2024

Read ICAEW's analysis of the Chancellor's Budget announcements and register to attend a free Tax Webinar on 1 November reflecting on the announcements.

The UK's Houses of Parliament, focusing on Big Ben.
The Tax Faculty

ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

Further resources

Latest news
Making tax digital image
TAXwire and Tax Track

Stay up to date with the latest developments by signing up to the Tax Faculty's weekly enewsletter and listening to the Tax Track podcast series.

Listen now Newsletter sign up
Practical guidance
Find out more about the Tax Faculty
Tax Faculty resources

The Tax Faculty offers expert guidance and support enabling you to provide the best advice on tax legislation to your clients or business. We offer clear direction in taxing times. Membership is open to everyone.

ICAEW support
Training and events

Browse upcoming and on-demand ICAEW events and webinars focused on developments in tax practice and policy.

See what's coming up A-Z of CPD courses
Open AddCPD icon

Add Verified CPD Activity

Introducing AddCPD, a new way to record your CPD activities!

Log in to start using the AddCPD tool. Available only to ICAEW members.

Add this page to your CPD activity

Step 1 of 3
Download recorded
Download not recorded

Please download the related document if you wish to add this activity to your record

What time are you claiming for this activity?
Mandatory fields

Add this page to your CPD activity

Step 2 of 3
Mandatory field

Add activity to my record

Step 3 of 3
Mandatory field

Activity added

An error has occurred
Please try again

If the problem persists please contact our helpline on +44 (0)1908 248 250