Autumn Budget 2024: what are the tax implications?

IHT

IHT consistently tops the charts of the UK’s most hated tax, even though it is paid by relatively few taxpayers. However, as the Chancellor confirmed that the current IHT threshold of £325,000 will be frozen to April 2030, and with inflation and the likely increase in property values in the next six years, we expect the number of those who have taxable estates to rise substantially.

Previously, valuable IHT reliefs including Agricultural Property Relief (APR) and Business Property Relief (BPR), could effectively exempt 100% of assets from a charge to IHT. Statistically, those who benefited most from these reliefs are the top 4% in terms of value of assets, who made the highest percentage of claims and had the highest IHT deductions attributed to those assets. Whilst APR is only able to be used for agricultural purposes, we have seen that the utilisation of BPR has moved from its original purpose of ensuring businesses were passed down the generations and not having to be sold to pay IHT, to now becoming part of mainstream tax planning to reduce IHT.

Therefore it is unsurprising that both BPR and APR have been targeted. Both APR and BPR are now limited to a 100% relief up to the first £1m and then at a flat rate of 50% of anything in excess of that. While it is good news that the reliefs were not abolished altogether, the sting in the tail is that the £1m is aggregated across both APR and BPR. We expect that this will mean that family farms will be particularly hard hit, with the value of property meaning that the farmhouse will take up most, if not all, of the 100% relief, and any land that has a value above its agricultural value is also now likely to fall into the IHT net. With these changes coming into force from 6 April 2026, if you have a business that is valued above the £1m threshold, or a farm with a valuable property and/or land that has a development or hope value, now is the time to start succession planning.

Shares held on the Alternative Investment Markets (“AIM” shares), and all quoted but unlisted shares, are also targeted. Whilst such shares have long been thought likely to lose some or all of their BPR benefits once they became part of mainstream IHT mitigation planning, for those who have invested in these, it will be important to review the impact of the change in BPR availability. Shares held in family or personal companies are not affected as they are not quoted on any exchange, but they will be counted as part of the £1 million threshold for 100% BPR and it will be important to review and, where necessary, value your shareholdings to ensure that you are aware of any potential IHT that will now arise.

Finally, pensions will no longer be IHT-free when passed down on death. While the IHT relief only applied in certain circumstances and many pension pots were taxable (to income tax if not IHT), further advice should be sought to limit IHT exposure and to think about how best to utilise pensions so as to free up other assets to pass on, particularly in the context of lifetime gifting.

SDLT

The additional 3% surcharge to SDLT for buyers of additional residential properties (including company buyers) increases to a 5% surcharge with effect for completions from 31 October 2024, though purchases pursuant to a contract entered into before this date will usually benefit from transitional rules.

The 15% flat rate of SDLT which can occasionally apply to a company buying a residential property for over £500,000 increases to a 17% flat rate with effect from 31 October 2024, though again, purchases pursuant to a contract entered into before this date will usually benefit from transitional rules.

It has also been confirmed that the thresholds for SDLT on residential property will reduce on 31 March 2025 as previously set in law; the higher thresholds will not be extended. That means more SDLT for buyers of residential property from 1 April 2025, especially first-time buyers.