Chancellor Rachel Reeves has announced that inheritance tax thresholds will stay the same until 2030, offering continuity in estate planning.
- The decision continues the previous government’s policy, with individuals able to pass £325,000 tax-free, rising with property involvement and marital allowance.
- From 2027, inherited pensions will be taxable, closing previous loopholes and altering financial planning dynamics for many.
- Key relief updates for property and businesses begin in 2026, providing partial exemptions yet adjusting overall tax liabilities.
- With tax revenue projections increasing due to the freeze, estates might face higher taxes, necessitating proactive financial advice.
Chancellor Rachel Reeves declared in the Autumn Budget 2024 that inheritance tax (IHT) thresholds will remain fixed until 2030, ensuring stability for those managing estates. This decision extends the previous policy which capped the tax-free estate amount at £325,000, increasing to £500,000 if a property is involved, and up to £1 million when allowances are transferred between spouses or civil partners.
Starting from April 2027, inherited pensions will be brought into the inheritance tax scope. This move addresses gaps left by the abolition of the lifetime allowance, affecting how beneficiaries might need to strategise their finances.
Property relief and business property relief see revisions from April 2026. While the first £1 million of combined business and agricultural assets stay exempt from IHT, any value beyond that will be taxed with a 50% relief, translating to an effective rate of 20%. The Chancellor assured that the majority of small family farms will remain unaffected.
A new 50% IHT relief is introduced for shares on the alternative investment market and similar platforms, impacting private investors significantly. This effectively sets a tax rate of 20% on such investments, a change aimed at encouraging support for these markets.
Stephen Lowe from Just Group commented on the implications of these changes, highlighting the upward revision of inheritance tax revenue forecasts. With current figures already hinting at rising tax collection, there is a clear indication that more estates may fall into the taxable bracket if property values increase. Individuals should seek professional advice to accurately assess their estate’s value and plan accordingly.
Freezing the inheritance tax thresholds implies significant implications for estate planning and encourages individuals to reassess their financial strategies.
