In her Autumn statement, the Chancellor, Rachel Reeves made several significant announcements but two areas that would have a direct impact on individuals and their families were in relation to inheritance tax and capital gains tax.
For inheritance tax, the current freeze on the inheritance tax threshold at £325,000 has been extended to 2030. Whilst this provides clarity over the next few years, it is likely to mean in practice that more estates will be drawn into the inheritance tax net, particularly if property prices rise.
However, there were two further announcements in relation to inheritance tax that will arguably have a greater impact. The first, is in relation to pensions so that from April 2027, inherited pensions will face an inheritance tax charge. Currently, pensions are generally exempt from inheritance tax, although the initial announcement did not go into the details of how this will work with the practicalities of different pension arrangements.
The other key inheritance tax announcement was in relation to agricultural and business property. The rules here will be changed as from April 2026 and whilst the first £1 million worth of combined business and agricultural assets will remain inheritance tax free, the Chancellor announced a 50% relief for sums over that amount, with effective rate of tax of 20%. Whilst the Chancellor states this would continue to protect small family farms it could have a considerable impact on more valuable family farms and businesses.
For capital gains tax, the Chancellor has announced that the rate of CGT will increase for investment sales, from 10% to 18% for basic rate tax payers and from 20% to 24% for those liable at the higher rate. This brings the rates of CGT in line with current rates for property sales, which will remain unchanged.
No doubt further details will emerge over the following days as the announcements are assessed.
Colman Coyle has considerable experience in advising in relation to lifetime inheritance tax planning and if you would like to discuss the issues raised here, please contact Patrick Green on 020 7704 3449 or Patrick.green@colmancoyle.com.
