What Are the Autumn 2024 Inheritance Tax Changes?

What Are the Autumn 2024 IHT Changes?

Chancellor Rachel Reeves announced the following changes in the October 2024 budget which will to result in more families being exposed to inheritance tax.

1. Extension of the £325,000 Tax-Free Threshold

The IHT threshold will remain fixed at £325,000 until 2030. Estates above this amount will continue to face a 40% tax on the excess.

2. Introduction of IHT on Inherited Pensions

Starting in April 2027, pensions passed on to beneficiaries will become subject to inheritance tax. This closes a “loophole” that allowed pensions to bypass IHT after the abolition of the lifetime allowance.

3. Changes to Agricultural Property and Business Relief

From April 2026, agricultural property and business relief rules will be adjusted:

• £1 Million Exemption: Families can still pass on up to £1 million in agricultural and business assets tax-free.

• Reduced Relief Beyond £1 Million: For assets exceeding £1 million, the relief rate will drop to 50%, resulting in an effective 20% tax on the surplus.

These updates are designed to protect small family farms, with three-quarters of claims expected to remain unaffected.

What Do These Changes Mean for Families?

For Families with Pensions

From April 2027, pensions passed to heirs will become taxable under IHT. Families must revisit estate plans to minimise this impact.

For Agricultural and Business Asset Owners

The new £1 million cap on full relief underscores the importance of reviewing how excess assets are structured or transferred to mitigate potential tax liabilities.

For General Estate Planning

With the £325,000 threshold extended through 2030, individuals have more certainty to plan strategically. However, it’s crucial to remain vigilant about potential changes post-2030.

How Can Families Prepare?

Proactive estate planning can help families maximise available exemptions and reliefs. These reforms aim to increase revenue while protecting smaller estates, particularly family farms and businesses.

To navigate these changes:

• Consult estate planners to assess and adjust wealth transfer strategies.

• Review asset structures to optimise use of reliefs and minimise IHT exposure.

• Take advantage of the planning window before significant changes, like the 2027 pension tax rule, come into effect.

By staying informed and planning carefully, families can continue to build intergenerational financial security amid evolving tax regulations.

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