The autumn 2024 Budget has introduced significant tax and regulatory changes, setting the stage for considerable impacts on estate administration. Following months of speculation, Chancellor Rachel Reeves has outlined new fiscal measures aimed at stabilising public finances and raising revenue. This blog unpacks these changes and explores how they might affect estate administration and planning, with specific implications for probate genealogy and asset repatriation professionals.
Key Inheritance Tax (IHT) reforms
With IHT reforms at the forefront, the Chancellor introduced a four-point plan focused on revenue generation, impacting estates in probate:
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Freezing the Nil-Rate Band (NRB): The NRB of £325,000 will remain unchanged until April 2030. Amid rising property values, this freeze means a greater proportion of estates, especially those with property, will be subject to IHT
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Closing the pension “loophole”: From April 2027, unused pension funds and death benefits will be included in an individual’s estate for IHT calculations, a shift from the current exemption status. This could push many estates above the IHT threshold, requiring more careful asset allocation and early estate planning
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Reforming agricultural and business property reliefs: Effective from April 2026, reliefs for agricultural and business properties will change significantly. Estates will receive 100% relief only on the first £1 million of combined agricultural and business property; amounts beyond that will qualify for 50% relief. Similarly, shares listed on the Alternative Investment Market (AIM) will see a 50% reduction in relief, moving to an effective IHT rate of 20%.
Implications: These changes are expected to increase IHT liabilities across estates with property, agricultural assets, and certain types of business interests. For legal professionals, this will likely mean a greater demand for comprehensive estate planning and probate services to identify all assets and determine optimal strategies for clients facing increased tax exposure.
Revisions to non-domiciled taxation
Starting April 2025, the remittance basis for UK resident non-domiciled individuals will be replaced by a revised regime. Under this new structure, eligible UK tax residents will benefit from a four-year tax-free period on foreign income and gains, which they can remit to the UK without further tax.
Implications for estate planning: This shift will alter planning approaches for non-domiciled clients, particularly those who acquire UK residency but maintain significant overseas assets. For professionals assisting these clients, there will be a need to review long-term tax liabilities and the potential inclusion of foreign assets within the UK tax scope.
Pension changes
In addition to estate inclusion, several pension-related changes have been announced:
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Bringing pensions into IHT net: As of April 2027, unused pension funds will count as part of the estate for IHT, affecting the overall estate value and liabilities
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State pension increase: A 4.1% rise in state pension rates will occur in 2025-26, reflecting earnings growth. Meanwhile, the triple lock mechanism will remain in place for the current Parliament
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Revised rules for overseas pension transfers: From April 2025, the Government will extend the 'Overseas Transfer Charge' to all Qualifying Recognised Overseas Pension Schemes (QROPS), equalizing tax treatment for European Economic Area (EEA) and non-EEA schemes
Implications for legal professionals: Estate administrators may need to take a closer look at pension benefits and consult with clients about the effects of pension funds on Inheritance Tax obligations, particularly as pension values fluctuate with ongoing market changes.
Corporate tax and business reliefs
The autumn Statement also included business-focused measures, notably targeting National Insurance (NI) contributions and corporate tax structures.
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Increase in employer NI contributions: Employer NI has been raised to 15%, with a threshold drop to £5,000, which will impact larger companies most significantly
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Maintaining Corporation Tax rate: The Corporation Tax rate remains at 25%, with promises of a new Corporation Tax roadmap to provide clearer guidance on future rates
Implications for estates with business assets: For legal professionals managing estates that include business assets, these changes necessitate a more strategic approach to planning around corporate tax, NI obligations, and the use of investment incentives. Additionally, the increased NI contributions may lead to decreased asset liquidity for some businesses, affecting the overall value of estates.
Wage and National Insurance adjustments
The budget increases the National Living Wage to £12.21 per hour, benefiting nearly two million workers. Furthermore, both Income Tax and NI thresholds will rise with inflation starting in 2028. For NI, there is a notable 1.2% increase for businesses, while employees remain unaffected.
Implications for estate valuation and planning: Rising wages and NI contributions may influence estate planning discussions, particularly in cases where family-owned businesses need to account for higher labour costs in their long-term planning.
Practical considerations for legal professionals
The recent changes signify increased complexity in estate administration and higher IHT liabilities. Here are a few ways legal professionals might address these shifts:
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Probate genealogy services: Comprehensive probate genealogy can help ensure that all heirs and claimants are accurately identified, streamlining the estate distribution process
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Asset repatriation: For estates with international holdings, the revisions in non-domiciled taxation and overseas pensions make timely repatriation and valuation services crucial
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Collaboration for detailed estate planning: Legal professionals may find value in collaborating with Tax Advisers to ensure that estates are managed with the new IHT and business relief restrictions in mind
Conclusion
The autumn 2024 Budget introduces complex tax and regulatory changes that will influence estate administration and probate processes in the years ahead. With adjustments to Inheritance Tax bands, pension rules, and business reliefs, estates of varying asset compositions could see increased tax exposure and a need for more strategic planning. These new rules underscore the importance of precise estate administration, particularly as they affect the distribution, valuation, and potential tax obligations on assets.
As these changes take effect, it’s essential to seek professional support for efficient estate administration. Whether navigating IHT thresholds, handling assets with unique reliefs, or assessing overseas holdings, probate services and genealogy expertise are more critical than ever to meet the needs of beneficiaries and Executors accurately and fairly.
At Title Research, our probate genealogy and asset repatriation services can provide valuable insights and assistance with these intricate estate matters.
Title Research is an expert in genealogical research and asset repatriation. We have excellent success rates for supporting legal professionals with overseas assets during estate administration and tracing thousands of missing people every year. If you would like to discuss how Title Research can help support you during different stages of the estate administration timeline, call our Client Services Team on 0345 87 27 600 or fill in the form below.
