Inheritance Tax Changes 2024 Autumn Budget: What You Need to Know

The 2024 Autumn Budget introduces major Inheritance Tax changes, impacting estate planning, pensions, family businesses, and investments. These are the most significant IHT reforms in 20 years and could greatly affect how your estate is taxed.

In this blog, we outline the key updates and provide actionable steps to help you navigate these changes effectively.

Introduction

The Inheritance Tax (IHT) landscape has undergone transformative changes with the 2024 Autumn Budget. These Understanding these reforms is key to reducing tax liabilities and passing your estate efficiently to your chosen beneficiaries.

Key Changes to Inheritance Tax

Pension Funds Now Subject to Inheritance Tax

From 6 April 2027, unused pension funds and death benefits will be subject to IHT. Previously, pensions were exempt from inheritance tax when passed on after death, but this is set to change, adding a new layer to estate planning for many individuals.

Substantial pension savings, especially in defined contribution schemes, will now be taxed like other parts of your estate. It is essential to review your pension strategy and understand the potential IHT liability to adjust your estate plan accordingly.

Why It Matters: Many individuals structured their estate plans around the assumption that pensions were IHT-free. These changes could result in significant tax bills for estates exceeding IHT thresholds, making it vital to reassess pension arrangements before 2027.

Reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR)

For family businesses and agricultural estates, Business Property Relief (BPR) and Agricultural Property Relief (APR) have been essential tools for avoiding IHT. However, from 6 April 2026, these reliefs have undergone significant changes, as legislated in Finance Act 2026:

• New £2.5 Million Cap: The 100% relief available for BPR and APR is capped at £2.5 million of qualifying property per person. Any value above this threshold only receives 50% relief, resulting in an effective IHT rate of 20% on assets over £2.5 million. Unused allowance can pass to a spouse or civil partner.

Learn about succession planning for businesses and farms in our dedicated guide.

Impact on Trusts: Each trust established before 30 October 2024 has its own £2.5 million allowance for 100% relief. Trusts set up by the same settlor on or after that date share one £2.5 million allowance.

What This Means for You: If your estate includes family farms or businesses, these changes could significantly affect your succession planning strategy. The new cap increases the risk of tax liabilities, making early inheritance tax planning more important than ever.

AIM Shares No Longer Fully Exempt from IHT

Shares listed on the Alternative Investment Market (AIM) have long been a popular tool for IHT planning, as they qualified for 100% business property relief if held for at least two years. However, as of 6 April 2026, AIM shares only qualify for 50% relief, meaning they are now subject to an effective IHT rate of 20%.

What’s Changing? The reduction in relief means AIM shares will no longer provide the same level of IHT benefit. If you have invested in AIM shares for IHT purposes, it’s time to review this strategy and determine whether the tax advantages still outweigh the risks.

The End of the Non-Dom Tax Regime

As expected, the government has announced the abolition of the non-domicile (non-dom) tax regime. Starting from April 2025, the UK will no longer offer a tax break for non-doms. Instead, a new residence test will apply for inheritance tax purposes:

• New Residence Test: From April 2025, individuals will be subject to IHT on their worldwide assets if they have been UK residents for at least 10 out of the last 20 tax years. After leaving, exposure continues for a “tail” of 3 to 10 years, depending on how long you were resident.

Impact on Non-Doms: This change means individuals with non-dom status will no longer be able to shield overseas assets from IHT, resulting in a significant shift for high-net-worth individuals with international holdings.

Read more about tax-efficient pension planning on our ASWATAX blog.

From 6 April 2027, unused pension funds and death benefits will be subject to IHT.

Planning Your Estate in Light of These Changes

Review Your Pension Strategy

The inclusion of pensions in the IHT net means individuals with large pension pots need to reconsider their pension drawdown strategies and death benefit provisions. Working with a financial advisor to reassess the most tax-efficient withdrawal strategy will be crucial in ensuring that your estate is not left with an unexpectedly large tax bill.

Succession Planning for Family Businesses and Farms

The £2.5 million cap on BPR and APR calls for early succession planning for family-run businesses and agricultural estates. If you own significant agricultural or business assets, consider gifting assets during your lifetime or restructuring ownership to minimize the impact of IHT on future generations.

Discover how to protect family businesses on our estate planning blog.

Reevaluate AIM Shares and Investments

Given the reduced relief on AIM shares, it may be necessary to reassess the role of these assets in your estate plan. Although they can still offer some IHT relief, the new rules make it important to consider whether they remain the most effective investment strategy for reducing IHT liabilities.

Update Your Will and Trusts

If your estate plan includes trusts or Wills based on previous IHT rules, you must update these documents to reflect the changes. This ensures that your wishes are carried out in a manner consistent with the new tax laws.

Consider Life Insurance to Cover IHT Liabilities

For some, life insurance may become a necessary tool to help cover potential IHT bills. If you anticipate a large IHT liability, a life insurance policy can provide the liquidity needed to pay the tax without the need to sell off family assets.

Conclusion

The 2024 Autumn Budget has introduced some of the most sweeping changes to Inheritance Tax in a generation. Reforms affecting pensions, business property relief, agricultural property relief, AIM shares, and non-domicile status will require individuals to rethink their estate plans.

Reviewing your estate plan and consulting with a tax advisor or financial planner will ensure your estate remains as tax-efficient as possible, protecting your wealth for future generations.

If you’re concerned about the potential impact of these changes, contact ASWATAX to discuss your options and ensure your estate planning is up to date.