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As you may already be aware, the Chancellor announced significant changes in the Autumn Budget to the availability of Business Property Relief and Agricultural Property Relief for Inheritance Tax purposes.
In summary, the changes will mean that after 5 April 2026, when an individual passes away and they have assets that qualify for Business Property Relief or Agricultural Property Relief, the rate of relief will only be 100% on the first £1m of assets that do not pass to a surviving spouse.
Thereafter, for any assets valued at over £1 million the rate of relief will be reduced to 50%. The effect of this means that on assets that qualify for the 50% Relief (i.e. assets in excess of £1 million), the effective rate of Inheritance Tax will be 20%.
For many business owners, these changes will likely cause you great concern. You are likely to have structured your affairs to manage the value that you have created within the business but will now need to act to ensure that robust plans are in place to mitigate the impact of these changes.
Government consultations on all the changes to IHT that were announced in the Budget are also ongoing, with a separate consultation ongoing regarding the general announcements on business property relief / agricultural property relief also taking place. Further details are also expected to be released by the government in the coming weeks.
The Chancellor also announced changes to pensions. Currently, pensions are generally exempt from Inheritance Tax which makes them a useful part of estate planning and Inheritance tax mitigation. However, new rules come into effect in April 2027 which will essentially bring pensions within the scope of Inheritance tax. Whilst HMRC are still consulting on this it is important that you start to consider this now. For example:
The changes announced in the Autumn Budget are likely to have a significant impact on many individuals’ IHT liability. It is therefore vital to take advice to fully understand the impact of the changes before considering the available options and next steps.
By ensuring you’re fully aware of the impact of these changes you can then start to prepare a plan and take the appropriate steps to protect your business and your family wealth and ensure that this passes intact to the next generation.
For example, it is advisable to consider the following:
We can offer a review of your Inheritance tax position for a fixed fee. This will highlight your potential exposure and suggest strategies to mitigate this. To discuss this further or arrange a review please contact a member of our Personal Tax Team on 0191 256 9500 or email advice@r-m-t.co.uk.
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