Autumn Budget 2024 — tax and estate planning tips for high-net-worth individuals

The Autumn Budget outlined several key fiscal policies that will affect individuals in the UK — especially those with significant wealth and assets in pensions, property and business — and may influence how wealth is managed, protected and passed on.

Here, Sarah Murphy and Saffia Ahmed explain how the Autumn Budget affects high-net-worth individuals — from inheritance tax changes to the use of offshore trusts.

Inheritance tax — inherited pensions rule change

Overview

For years, inheritance tax (IHT) has been a point of concern for wealthier individuals. The Autumn Budget brings a significant change to the rules surrounding inherited pensions.

• Rates Frozen Until 2030 — the Nil Rate Band remains at £325,000 and the Residence Nil Rate Band (for those passing on a home to direct descendants) stays at £175,000. These thresholds remain frozen until 2030, so there are no immediate changes to note. However, you should remain aware of the potential impact of asset growth over the next several years.
• Pensions to be Included in IHT (April 2027) — one of the most notable changes announced was the inclusion of pensions in the deceased’s estate for IHT purposes, starting in 2027. Previously, pensions were largely exempt from IHT but the Government now sees pensions as a vehicle for capital accumulation and wants to ensure that they contribute to the estate.

This change will affect:

• Uncrystallised defined contribution pensions.
• Crystallised pensions not invested in annuities.
• Lump-sum death benefits from defined benefit pensions.

The onus of reporting and paying IHT on pensions will shift from the deceased's personal representatives to the pension provider and the Nil Rate Band will be apportioned across the deceased’s entire estate, including pensions.

Where the deceased has died before turning 75, when their pension is withdrawn the recipient will not pay income tax, although there may be IHT payable. However, if they died after turning 75, the recipient may pay IHT and then income tax when they draw down on the pension. Importantly, pensions written in Trust don’t have any additional protection. 

Implications

This could prompt a shift in how wealthier individuals approach pension planning in the coming years. The introduction of IHT on pension pots may make it more attractive to draw from pensions later in retirement or consider alternative savings vehicles such as ISAs, which continue to remain IHT-free.

It’s important to note that there’s an ongoing consultation on pension reforms. Any final reforms to the pension IHT regime will be subject to the Government’s review of responses from various stakeholders and interested parties, so this area may be subject to change.

Agricultural and Business Relief — adjustments to asset protection

Overview

The changes to Agricultural Relief (AR) and Business Relief (BR) may affect farmers, landowners and business owners — particularly those with assets valued over £1m.

• Agricultural Relief and Business Relief on trading businesses — from April 2026, the 100% IHT relief on agricultural and business assets will be limited to the first £1m of combined assets. If the total value of qualifying assets exceeds £1m, the relief will apply proportionately and anything above this threshold will attract a 50% IHT relief.
• Business Relief on AIM shares — the relief on AIM (Alternative Investment Market) shares will be reduced to 50%, meaning that fewer investors will be able to benefit from the full tax exemption available under current law.

Implications

These changes could make it more attractive for farmers, landowners and business owners to consider transferring assets into trusts or giving away assets while they’re still alive or considering alternative options — particularly if the assets in question are expected to increase in value. However, this strategy will be more feasible for those who aren’t financially dependent on these assets for their livelihood. You should seek advice before taking any steps in relation to your assets.

Capital Gains Tax (CGT) adjustments — non-residential property and carried interest

Overview

There are significant increases in CGT rates — particularly for non-residential property and carried interest — which could affect individuals that hold commercial or investment properties.

• Non-residential property gains — starting from 30 October 2024, the rates of CGT on disposals of non-residential property will increase depending on the individual’s marginal rate of tax. This increase will apply to gains on properties that aren’t your primary residence, so it may affect those with significant property portfolios. Yet although the rates of CGT have risen, the rates for residential property gains are unchanged, meaning that those have effectively been abolished.

Implications

High-net-worth individuals who are thinking about passing wealth on before they die may need to take the increased CGT rates into account. For instance, parents who wish to gift or transfer property or business shares to their children may be faced with higher taxes on any capital gains at the point of transfer.

Trusts used for estate planning may also be impacted. Individuals using trusts to manage the transfer of their wealth may need to reassess the structure of these trusts to mitigate any unintended CGT liabilities upon asset sales.

Personal tax thresholds — no immediate changes, but inflation uplift in 2028

Overview

In terms of personal tax rates, there’ll be no immediate changes to the basic, higher or additional rates of income tax, National Insurance (NI) or VAT. However, from 2028, the personal tax thresholds will be uprated in-line with inflation.

This means that while the Government isn’t raising taxes in the short term, your tax allowances and thresholds could increase with inflation over the next few years.

Domicile changes — new regime for international taxpayers (from April 2025)

Overview

The UK is moving towards an internationally competitive tax system that will affect non-domiciled individuals and their use of offshore trusts.

• End of offshore trusts for IHT shelter — the new rules, set to come into effect from April 2025, will end the ability to use offshore trusts to shelter assets from IHT.
• Tax on foreign income and gains — under the new regime, anyone who has been UK tax resident for more than four years will be subject to UK tax on their foreign income and gains even if they aren’t remitted to the UK. This rule will apply regardless of whether an individual is domiciled in the UK or elsewhere, aligning the tax treatment of foreign income and gains for both UK-domiciled and non-domiciled residents.

Implications

Wealthy individuals with offshore structures should seek advice on whether to transfer assets into UK trusts, change the ownership structures of assets or look for alternative tax-efficient structures ahead of 2025.

Non-domiciled individuals who’ve been in the UK for a long period of time may now face a substantial increase in their tax exposure. They’ll be subject to UK taxes on their worldwide income and gains and IHT will apply to their global estate. This change will particularly affect long-term non-domiciled residents who’ve relied on the ‘remittance basis’ to avoid paying tax on income and gains outside the UK. For many, this could mean a shift in how they manage their estates and investments.

Our Head of Family, Cara Nuttall, has commented on the potential consequences of fleeing the UK before April to avoid tax changes.

Key takeaways for high-net-worth individuals

Wealthy individuals — especially those with complex estates — should start considering how these new policies will affect their long-term financial and estate planning. 

Our Brabners Personal team can work closely with you, your family and your wider professional advisory team to understand your goals and implement an all-encompassing plan to help you get there — while anticipating any roadblocks and pitfalls that could arise along the way.

If you need to reassess your strategies in light of the new policies and take steps to optimise your wealth transfer plans, talk to us by giving us a call on 0333 004 4488, sending us an email at hello@brabners.com or completing our contact form below.