My Thoughts On Inheritance Tax And The Private Client Space, Ahead Of The Autumn Budget 2024

Update (2026): This article was written before the Autumn Budget 2024, and what follows are pre-Budget predictions rather than the current law. The outcomes were as follows.

• From 6 April 2026, 100% Business and Agricultural Property Relief applies to the first £2.5 million of qualifying property per person, with 50% relief above that. Unused allowance can pass to a spouse or civil partner. Shares on AIM and similar markets get 50% relief only.
• Pensions come into the scope of inheritance tax from April 2027.
• From 6 April 2025 domicile no longer decides UK tax. The remittance basis was replaced by a 4-year foreign income and gains (FIG) regime for people arriving after 10 consecutive years of non-residence. Inheritance tax now depends on long-term residence: UK resident in at least 10 of the previous 20 tax years. After leaving, exposure continues for a 'tail' of 3 to 10 years, depending on how long you were resident.
• Capital gains tax rates are now 18% and 24%.
• The death uplift was kept.
• The nil-rate band is frozen until 2031.

Here are some of my thoughts on what we might expect in the Autumn Budget 2024, set to be delivered by Rachel Reeves on 30th October 2024."

I will particularly focus on Inheritance tax ('IHT') and the private client space for this blog post.

Autumn Budget 2024: Frozen Nil-Rate Band – A Stealth Tax?

I believe the Nil-Rate Band will likely remain at £325,000, where it’s been since 2009. 😱 I have always said that this should have been upped years ago in line with inflation, but hasn't been the case. This ‘stealth’ approach to increasing IHT revenue subtly pulls more estates (as it prolifically has been) into the IHT net as asset values rise (or have already risen), without explicitly changing policy - a tactic we would prepare our clients to navigate.

Offshore Trusts: Tightening the Noose

Expect new legislation to 'tighten the noose' on offshore trusts, increasingly bringing them within the UK IHT scope, as already hinted at many times. This would significantly impact strategies involving international assets. We would want to explore 'wider' strategies here.

Expect new legislation to 'tighten the noose' on offshore trusts, increasingly bringing them within the UK IHT scope, as already hinted at many times.

Residence Nil-Rate Band (RNRB): Potential Reforms

Residence Nil-Rate Band (RNRB). We may see reforms to the RNRB tax allowances introduced in 2017. Potential changes could broaden its applicability to reflect modern family structures, but also possibly reduce its generosity. Keeping a close eye on this could be crucial for optimising estate planning. Once an estate's value reaches £2.35 million, one person's £175,000 Residence Nil-Rate Band is fully tapered away, and a married couple's combined £350,000 allowance is fully lost at £2.7 million, an Inheritance Tax cost of up to £140,000. As I say, tightening the rules could 'endanger'* a family.

Business and Agricultural Reliefs: Significant Changes Ahead

Now that I’ve gotten back on my chair after falling over from the initial shock, I believe the Autumn Budget 2024 could bring significant changes to Business Relief and Agricultural Relief both of which currently serve as powerful tools for IHT mitigation. To be honest, I was quite surprised and shocked; I think these changes could really knock business owners for six if the government decides to put a lid on BPR (or BR). Although these reliefs aim to encourage investment in trading businesses, we often use them as strategic tools when we assess a client’s estate. It’s possible that we’ll see a narrowing of these reliefs, which would fundamentally alter the landscape of tax-efficient investments. 🙄 I'm hoping not for the sake of my clients. **

Modernizing Wills: Electronic and Video Wills

A lawyer friend mentioned possible reforms to Wills, including introducing electronic or video Wills, not directly tax-related. While this doesn't directly impact IHT, it would make tax planning and the private client space work more 'accessible'.

Capital Gains Tax (CGT) Reforms: Death Uplift Under Scrutiny

One important tax consideration that may come under scrutiny is the concept of 'capital gains rebasing' on death. Currently, when someone passes away, no Capital Gains Tax (CGT) is levied on the assets they held. Instead, for CGT purposes, the beneficiary is deemed to have acquired the asset at its market value at the time of death. This effectively erases any capital gains or losses accrued during the decedent's lifetime. A ‘style of planning’ we explore if the circumstances seem fit so we’ll definitely be watching!

This rule, rightly so in my eyes, prevents a double tax burden of both Inheritance Tax and CGT on assets held at death. However, it can discourage individuals from gifting assets during their lifetime. A gift could trigger a CGT charge, and if the giver passes away within seven years, the estate might also face an IHT charge. This has led many to retain assets, knowing that any CGT exposure is nullified upon death, thereby avoiding the risk of being hit by both taxes.

The Office of Tax Simplification (OTS) has recommended that the government consider abolishing the CGT ‘death uplift’ altogether. Although they didn’t propose that both CGT and IHT should be immediately payable upon death, they did suggest that the CGT liability could be passed on to the inheritor.

Autumn Budget 2024

Double Taxation Risks: CGT and IHT Combined

Economists Arun Advani and David Sturrock propose treating death as an asset disposal, potentially triggering immediate CGT charges. Don’t know what some people are playing at!

A £100,000 gain on a rental property at death could incur a £24,000 CGT bill at 24% rate. The remaining £76,000 would then be subject to IHT, which could lead to an additional tax of up to £30,400. Combined, these taxes could result in a total charge of £54,400, an effective rate of 54.4%.

In the case of unlisted shares, the effective tax rate could be slightly lower at 52%. Such changes could be attractive to the Chancellor as a way to raise additional revenue without directly increasing tax rates. However, it would lead to more families having to deal with tax liabilities upon a loved one’s death, possibly resulting in the need to sell assets rather than pass them on.

Public Reaction: Farmers' Protests and Policy Debates

Such ideas being thrown out is certainly getting more and more people to consider their options. Many were already fed up with being taxed ‘at every step of the way’, and with my conversations, the pool of wealthy individuals wanting to leave has increased considerably.

Strategic Planning: Navigating the New Landscape

As an 'expert' in this space, I’m closely monitoring these potential shifts to ensure my clients remain ahead of the curve. I haven't even gone into detail on the non-dom position on this post.

Ultimately, now more than ever, is the time to rethink strategies and safeguard your family wealth as far as possible in light of these possible changes.

We can leverage our expertise and proven strategies to minimize tax leakage based on your family's unique circumstances. We'll strive to minimise or potentially eliminate your CGT or IHT liabilities upon death, based on your circumstances. Both existing and new clients are reaching out to get their affairs in order. Accelerating certain transactions perhaps, but ultimately, being proactive to discuss their affairs (the first step).

Always happy to discuss.

* sorry for using gripping and dramatic words 😂

** At the time of writing (August 2024), BPR and APR was available as a 100% (or 50% in some instances) relief. See the Update (2026) box at the top of this article for the position now.