Autumn 2024 Budget Breakdown

After weeks of speculation, the new budget has finally been announced, introducing several key changes, particularly around inheritance tax (IHT) and capital gains tax (CGT), as well as changes impacting non-domiciled residents.

Chancellor Rachel Reeves has extended the freeze on the IHT nil-rate band, which maintains the current £325,000 threshold for an additional two years, extending it now until 2030. This threshold freeze means that, as asset values rise, more estates may fall within the taxable range. The Residence Nil Rate Band, however, will remain unchanged.

Starting in April 2027, unused pension funds and death benefits from pension funds will now be included in the taxable estate for IHT purposes, meaning that any unspent pension savings left behind by the deceased will be subject to inheritance tax.

Additionally, the new budget has proposed reforms to Agricultural Property Relief and Business Property Relief. Under the revised rules, the first £1 million of combined business and agricultural assets will remain exempt from IHT. However, assets exceeding this threshold will be taxed at an effective rate of 20%, with a 50% relief applied. This change will take effect from April 2026, potentially impacting high-value family businesses and estates.

In terms of CGT, the lower rate will increase from 10% to 18%, and the higher rate from 20% to 24% as of April 2024. Rates on residential property, however, will stay at 18% and 24% respectively. Additional reforms to CGT are expected by April 2026, suggesting further adjustments ahead.

Reeves also announced the abolition of the non-domicile tax regime, which previously allowed residents domiciled abroad to avoid certain taxes on overseas income. This will be replaced with a residence-based scheme aimed at balancing competitive tax conditions for temporary residents while ensuring tax fairness.

These measures mark significant steps in reshaping the UK’s tax landscape.

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