Changes are coming for Inheritance Tax – Autumn Budget 2024

Rachel Reeves has confirmed that changes to Inheritance Tax will be made, reducing the reliefs available on agricultural and business property.

What happens now

Currently estates which hold agricultural, or business property can qualify for 100% or 50% relief depending on the assets and their use. As an example, an owner manager of a trading company could therefore benefit from 100% tax relief on their shareholding, irrespective of the value of the shares.

What is proposed

From 6 April 2026, estates with agricultural or business property will be able to claim 100% relief only on the first £1 million of qualifying assets, with any value above this receiving 50% relief.

For example, if a business is valued at £10m, this would increase the value subject to Inheritance Tax by £4.5m, and increase the tax liability by £1.8m (an effective rate of 20% on the value over £1m).

A similar increase in tax is likely for an agricultural business of the same size.

The definition of qualifying assets for Business Property Relief and the ownership period remains unchanged, but from 6 April 2026, publicly traded shares but not listed on recognised stock markets (e.g. AIM shares) will see their relief reduced from 100% to 50%, noting their value won’t count towards the £1 million threshold.

Additionally, there will be an extension for qualifying agricultural land managed on behalf of specific bodies starting from 6 April 2025.

It is also unclear if/how these restrictions will apply during a person’s lifetime.

A consultation is expected in early 2025 into the proposed changes.

What to expect

These changes could significantly impact estate and tax planning strategies and therefore early planning ahead of the changes would be recommend. Cashflow will become even harder for estates, especially farming businesses where they are asset rich, but cash poor, with the increased prospect of assets having to the sold to fund the Inheritance Tax.

Also announced was the introduction of Inheritance Tax on pensions. More details can be found here.

Watch our Autumn Budget 2024 question time webinar

Following the Autumn Budget 2024, our panel of experts examined the announcements made by The Chancellor, discussing what these changes mean for you. They also answered questions from our live audience. This webinar is now available to watch on demand here.

Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.