What the Autumn Budget 2024 means for estate administration

Following a summer of political change and a new Labour Government, the Autumn Statement by the UK’s first female Chancellor, Rachel Reeves, brought forward long-anticipated updates to taxes, minimum wage and business reliefs.

Mrs Reeves first started by saying that her plan is to “restore stability of public finances and rebuild public services” and made it clear that change must be felt. The focus of these changes is on public investment, particularly in healthcare and education, and to restore stability in public finances. Here’s a summary of the key changes that may impact you or your clients in estate planning and beyond.

Inheritance Tax (IHT)

Despite speculation, the Chancellor did not increase IHT rates or make all estates taxable. Instead, she introduced a four-point plan that includes:

1. Freezing the Nil-Rate Band (NRB) at £325,000 until April 2030
2. Closing pension “loopholes” by bringing unused pension funds into the IHT net from April 2027
3. Reforming Agricultural and Business Property Reliefs, allowing 100% relief on the first £1 million, with 50% on amounts beyond that starting April 2026
4. Reducing AIM relief from 100% to an effective IHT rate of 20% from April 2026

Impact: We would expect more estates to become taxable due to a frozen NRB and other reliefs being reduced.

Capital Gains Tax

The main rate of Capital Gains Tax (CGT) that applies to Personal Representatives has increased from 20% to 24%. Disposals made now will have this uplift. 

Impact: Not only does this increase reduce the value received into the estate, but there is also the extra administrative burden for Personal Representatives as they'll have 'gains' subject to different rates throughout 2024/2025. 

UK non-domiciled tax changes

From April 2025, the remittance basis for UK resident non-domiciled individuals will be replaced. Instead, new residents will enjoy a “tax holiday” on foreign income or gains for their first four tax years, without further UK tax upon remittance.

Impact:  Non-doms will now pay UK tax on overseas income after four years of residency and previously tax-exempt Trusts will also fall under the UK IHT scope.

Pensions

Starting April 2027, unused pension funds and death funds will be counted within an estate for IHT purposes.

Impact: The inclusion of pensions and death benefits as part of a person's estate will increase the value of estates; impacting the use of pensions as inheritance planning.

Business tax and reliefs

Corporation tax remains at 25%, but the rate of employer National Insurance (NI) will increase to 15%, while the threshold is lowered. However, small businesses benefit from an increased Employment Allowance, helping many avoid NI entirely.

Income tax and NI thresholds will rise with inflation from 2028-29, and 'Making Tax Digital' will extend to sole traders and landlords with higher incomes.

Impact: This increase in employer NI could lead larger companies to reconsider hiring or wage growth, with small businesses bearing a potentially lesser impact. The Office for Budget Responsibility (OBR) has suggested that this may impact businesses' decisions to charge more for their services, employ fewer people, and/or reconsider wage reviews.

Wage increases

The National Living Wage will increase by 6.7% to £12.21 per hour, benefiting close to two million workers. Employee rights protections have also been promised.

Conclusion

As these changes take effect, it’s essential to seek professional support for efficient estate administration. Whether navigating IHT thresholds, handling assets with unique reliefs, or assessing overseas holdings, probate services are more critical than ever to meet the needs of beneficiaries and Executors accurately and fairly.

We’re here to help ensure that estates are managed smoothly, assets are properly accounted for, and beneficiaries receive what they’re entitled to with minimal delays. Reach out to our team for guidance on these recent changes and support with estate administration.