Autumn budget 2024: insights on inheritance tax, farming relief and business ownership

The autumn budget has brought about a number of changes, some of which relate to inheritance tax and agricultural and business property relief, as well as employers’ national insurance contributions and capital gains tax.

As Cheltenham solicitors, our legal experts share their autumn budget insights and guidance for both individuals and businesses in Gloucestershire and beyond.

Wills, trusts & probate

IHT thresholds and reliefs

It was confirmed that inheritance tax allowances – which had been frozen until 2028 – will continue to remain on ice until 2030. However, property values will likely increase, meaning more and more estates will be subject to inheritance tax. The standard inheritance tax allowance for an individual (also known as a nil rate band) remains at £325,000.

The residence nilrate band (RNRB) – which benefits estates that include a residence passed to direct descendants – remains at £175,000. Inheritance tax may be reduced by exemptions such as the spouse exemption (leaving assets to a spouse) or the charity exemption. Changes were not made to these exemptions.

Pensions

From 2027, inherited pensions will be subject to inheritance tax. This will be a seismic change given that pensions are usually exempt from inheritance tax with them being treated as falling outside of an individual’s estate. Pensions have been a useful inheritance tax planning vehicle for some time. This change will likely mean that many more estates will be caught by inheritance tax, and it is more important than ever to take estate planning advice to protect wealth as far as possible.

Eliza Senior-Fellows, solicitor, wills, trusts & probate

Agriculture & estates

Agricultural property relief (APR) and business property relief (BPR)

Agricultural property relief was introduced in 1984 to support farming families by reducing the costs associated with transferring agricultural assets. It is anticipated that the changes to both APR and BPR announced in the 2024 autumn budget will have the opposite effect.

Currently, certain business and agricultural assets are eligible for up to 100% relief from inheritance tax. From 6 April 2026 however, only the first £1 million of combined agricultural and business property will qualify for the existing rate of 100% relief. After the £1 million allowance, the rate of relief will be reduced to 50%, resulting in an effective tax rate of all land over this figure of 20%.

This allowance applies to transfers that occur as a result of the death of the proprietor, lifetime transfers to individuals in the seven years before death (including those made between now and 6 April 2026), and chargeable lifetime transfers – for instance, when property is transferred into trust. Any unused allowance will not be transferrable between spouses and civil partners, as is the case with, for example, the residence nil rate band.

As a result of the budget, there is likely to be an increase in the number of farmers transferring their assets into trust or making lifetime gifts, alongside wider estate planning considerations. Decisions of this kind will help farmers protect the viability of their businesses for future generations; but such decisions do require careful thought and consideration. Please do not hesitate to get in touch if you have queries on how your farming partnership and operations can be best adapted in light of these recent changes.

Adam Hale, partner, agriculture & estates

Corporate & commercial

What does the budget mean for businesses?

In the build up to the Chancellor’s autumn budget statement, the government was at pains to deliver the message that they want to encourage investment and boost growth to the UK economy. It wanted to give businesses the certainty they need and have confidence that the UK intends to remain competitive from a global standpoint.

While the changes announced were not as bad as some feared, it is still the case that the changes announced on budget day will have a significant impact on businesses and individuals alike. What are the main things that will impact local businesses and their owners going forwards?

Corporation tax

The first pledge was to keep the headline rate of corporation tax at 25% and maintain the small profits rate at 19%. Research & development (R&D), patent box and intangible assets tax regimes were kept in place.

National insurance

The rate of employers’ national insurance contributions increased from 13.8% to 15% and the threshold at which employers’ contributions become payable falls from £9,100 to £5,000. Although the employment allowance has been increased from £5,000 to £10,000 per year and will be available to all companies going forwards, this is a significant cost increase, especially for small businesses, eating into profits and cashflow.

Capital gains tax
A key point to note is the changes to the capital gains tax (CGT) regime, specifically the changes to business asset disposal relief (formerly entrepreneur’s relief). Although there is no immediate change, increases to the applicable tax rates will come into play soon. The £1M qualifying band remains the same, but from 6 April 2025 the applicable 10% rate will increase to 14% for disposals of shares made on or after 6 April 2025, and will increase again from 14% to 18% for disposals made on or after 6 April 2026.

This means that tax bills on share sales of up to £1M will increase by up to £40,000 for the 2025 tax year and up to £80,000 for 2026. The applicable rate for CGT on disposals above £1M has increased by 4% from 20% to 24%, or by £40,000 for every additional £1M of sale proceeds, and this is effective from 30 October 2024.

What does this mean for businesses looking to sell?

It remains to be seen what impact this has on the marketplace in general or on an individual’s appetite to sell their company. It is possible, for example, that would-be sellers may look to hold onto their companies for longer so that business values increase to mitigate any rise in tax liability, potentially stymying the flow of deals we are currently seeing. Given the financial strains of increased cost of borrowing which are already prevalent for businesses, the question is whether the autumn budget will promote the economic growth the government desires. Time will tell.

Peter Raybould, partner, corporate & commercial

We’re here to help

For further details or tailored advice following the Chancellor’s autumn budget announcement, please do get in touch.