Budget Review – Autumn Budget 2024

Posted: 8th November 2024

Following the Chancellor’s budget on Wednesday 30th October 2024, we spoke with EMG Solicitors’ Director and Head of Residential Conveyancing, Richard Swinbank and Samantha Edward, Director and Head of Wills, Trusts and Probate. Here they share their views on the recent changes and the impact for their clients.

Richard Swinbank, Director and Head of Residential Conveyancing at EMG Solicitors said:

“One of the biggest surprises of this year’s budget was the unexpected 5% stamp duty for additional properties. Up from 3% and coming in with immediate effect, the rise has almost doubled costs for landlords. For many clients this has caused much concern and frustration, particularly for those with transactions still waiting to complete, leaving individuals looking at how to bridge the shortfall in costs.

The announcement proved to be a bit of a break from the norm. Typically, changes are made with time provided for people to get their house in order, but unfortunately, this hasn’t been the case here.

The approach of landlords has been very pragmatic in the most part with them embracing those changes. Some are deciding to sell parts of their portfolio but with an already difficult rental market crisis, and with a reluctance for further buying, there is a concern this may make the situation worse for the housing market. Some landlords will invariably be forced to pass some of these additional costs onto tenants too making the cost-of-living squeeze for them even tighter.

Stamp duty for homeowners

For homebuyers there is also change. Typically, stamp duty on properties up to £250,000 are exempt, but following the spring budget next year it is anticipated from April that any properties between the value of £125,000 to £250,000 will be subject to 1% stamp duty. Anything above that being subject to a tapering rule with amounts rising in line with the individual property value.

One way or another, what we are seeing at EMG is an increased demand for advice around property transactions. Whatever our client’s circumstances, our team are here to help them navigate that journey.”

Inheritance tax changes

Samantha Edward, Director and Head of Wills, Trusts and Probate confirmed:

“There have certainly been some big announcements in this latest budget for estate planning. The first one might not come into effect until April 2026 but is set to have a significant impact on our business and farming clients with the reliefs from inheritance tax (IHT) called business relief and agricultural relief being limited to a combined £1million allowance, which does not appear to be transferable between spouses like the nil rate bands. In short anything above that will now be subject to an effective rate of tax of 20%, yet prior to this budget, the entire farming estate may well have passed tax free to family members. To give an example, on figures of a £4 million estate which would currently pass free of IHT, from April 2026, IHT of around £600,000 will be payable, which will mean family members may be forced to sell land or assets to release the necessary funds. Even though there is an option to pay in 10 yearly instalments, that’s still a huge £60,000 plus interest per year that they need to find, which simply may not be feasible. The new allowance may undermine the policy rationale of the reliefs themselves; to prevent the breakup of family farms and businesses. It is imperative to take advice on the ownership of relievable assets to ensure each spouse owns sufficient to use their allowance so it is not lost, and also to review your Will and its structure. A nil rate band discretionary trust in your Will on the first death that captures relievable assets can work to bank this value outside of the surviving spouse’s estate but still allow them to benefit and with careful drafting, allow them still to control these assets.

Unused pensions – inheritance tax inclusion

Another huge impact is the inclusion of unused pensions within the scope of IHT. Currently, these would pass free of IHT so you can pass these down to family members with no charge, but from April 2027 they will be included within the inheritance tax regime, with a charge of 40%. This will be in addition to the income tax that will be owed on the amounts drawn down on a post- 75 year death, so is set to have quite a sizable impact.

Nil rate band – freeze

The Government have extended the freeze of the nil rate band until 2030, previously held till 2028. (In basic terms, the nil rate band (NRB) is the sum of your estate which can be passed on to any beneficiary free from inheritance tax.) This may not seem like big news, but the nil rate band has been £325,000 since 2009, so in this 15 year period alone inflation will have increased the value of assets to approximately £503,000.  You can see  in a nutshell, how the Government will be gaining more tax from this freeze.

The residential nil rate band, however, still remains in place and but the value similarly frozen to that of 20/21 at £175,000 per person. Likewise, the qualification criteria also remains the same meaning some individuals will be able to leave £500,000, passing free of tax if they have an interest in a residence up to the value of this additional nil rate band that they claim, and are passing this to their direct descendants. Finally, their estate must be valued at under £2 million. Another threshold frozen.

In summary, the impact of these frozen sums means it is really important for clients to review their estates and their Wills to ensure they have the most tax-efficient structure. Once again the use of Nil Rate Band Discretionary Trust in your Wills could really be an advantage under the new rules and our team at EMG are happy to help with this incredibly important planning.

Conversely, there were lots of things that were anticipated in this budget that were not changed. For example, there were no changes to either the gifting rules or those relating to deeds of variation.

We appreciate this budget has presented a lot of change for some of our clients, whilst other areas have remained consistent.  If you have any questions, in relation to any of these matters or indeed any others not mentioned here, our dedicated and experienced team are always on hand to support.”