Your Will after the 2024 Autumn budget

Now that some time has passed since the first Labour budget in 14 years, now is the time to review your finances and in particular your Wills. The Chancellor in the 2024 budget announced a further freeze on the inheritance tax (IHT) nil-rate-band from 2028 to 2030 and pensions will form part of a person's estate from April 2027.

What this means for you? 

While some might be relieved that the IHT nil-rate-band remains at £325,000 and was not reduced, it is worth noting that it will remain frozen at £325,000 up to 2030.  Therefore, careful consideration will need to be taken into account in any estate planning, because while the nil-rate band remains frozen the value of UK property continues to rise.

For example, the £325,000 nil-rate-band has been in place since April 2009, but since then the average UK property price has increased by over 70% since April 2009 to 2024. Meaning if a person bought a property in April 2009 for £325,000 it could potentially be worth in the region of £575,000 in 2024. As a result, this could increase a persons' exposure to IHT of about £100,000 in 2024 as opposed to £0 in 2009. (However, it is worth noting that a person can reduce their IHT exposure if they qualify for the Spousal or Direct Descendent exemption).

Simply put, the nil-rate-band has not kept up with the value of your estate since 2009 and therefore increasing a person's exposure to IHT.

There are of course other ways to protect or reduce a person's estate from IHT, however, this will depend on how your Will is constructed. Therefore, it is always best practice to speak to a professional to review your Will after any life events or even tax changes to ensure a person's wishes are carried out in the best way possible.

Pensions

From the 6 April 2027 the Chancellor confirmed that unused pension funds and death benefits will form part of a person's estate for IHT purposes. 
 
Before the budget, pensions were a useful instrument as a form of estate planning, as funds in the pension were not usually part of a person's taxable estate. However, following the budget the Chancellor announced that any unused pensions and death benefits will be included as part of the estate for inheritance tax purposes. While there still remains some uncertainty about how it will work practically, the overall idea is that a pension can no longer be an instrument for estate planning. 

Review your estate planning and Will

Therefore, following the pension changes and the further freeze on the IHT nil-rate band it's a good idea to review your estate planning and your Will. This will ensure that your estate remains up to date and tax efficient in-line with the above tax rule changes. With the potential higher exposure to inheritance tax this might leave less than you had hoped to your beneficiaries. 

Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of advice, recommendation or opinion. DPM Legal Services Limited accepts no liability for any loss or damage, howsoever caused, as a result of any reliance on any information provided.