Legal News | 10.10.24
The impending Budget
On 30 October, Chancellor of the Exchequer Rachel Reeves will deliver the Autumn Budget. This will be the Labour government’s first Autumn Budget and with the Prime Minister warning us that it will be “painful” and “difficult to hear”.
As in previous Budget years, many of the headline tax changes have been publicised in advance. We already know that changes to the non-dom regime are planned, and VAT will be added to school fees.
When it comes to other taxes, such as inheritance tax (“IHT”) and capital gains tax (“CGT”), however, we have only rumour to go on. If you are concerned about possible CGT and IHT changes it could be worth considering making gifts to children and grandchildren before the October Budget.
Current Position: IHT
On death, if an individual’s estate exceeds the nil rate band of £325,000 (or £500,000 where the family home is included and the estate meets the criteria for the Residence Nil Rate Band), it will be liable for IHT at 40%. Married couples benefit from a combined IHT threshold of £1m before paying IHT (again, provided the Residence Nil Rate Band criteria is met). These rates and rules have remained unchanged since 2009.
The simplest way to reduce the size of an estate liable to IHT is through gifting. See our Newsletter here for the current IHT rules for gifting. These gift allowances have remained unchanged for over four decades, whilst helpful, their real value is much diminished and are unlikely to be improved in the Budget.
Current Position: CGT
The current rates of CGT depend at what rate you pay income tax and the asset on which you are paying the tax. For the 2024/2025 tax year the CGT rates range from 10% to 28%, with a top rate of 24% for gains on disposals of property. It is thought these are the lowest that CGT rates will be for some time if the rumours are correct and the Government brings the rates into line with income tax rates.
Whilst gifting is the simplest way to reduce your estate for IHT, if you make gifts of assets which carry gains you will be making a disposal for CGT and will need to pay CGT on the gain in value since you acquired the asset. Usually clients are hesitant to make gifts of assets carrying gain due to the CGT liability however if you are thinking of making a gift of an asset which carries gain it would be worth considering this before 30 October.
