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IHT Changes
The IHT changes announced in the Autumn Budget will dramatically affect the passing on of an estate for individuals, non-doms, business owners and farmers from April 2025 onwards.
The changes announced were as follows:
- The abolition of the non-domicile regime from 6 April 2025 and the move to a residence-based system.
- This means those individuals who have been resident for at least 10 out of the last 20 tax years will fall within the definition of ‘long-term resident’ and will be subject to UK IHT on their global assets.
- Agricultural Property Relief (APR) and Business Property Relief (BPR) will have a combined limit of £1m. Thereafter, 50% relief applies, giving an effective 20% tax rate from 6 April 2026.
- The IHT Nil Rate Band £325K and Additional Nil Rate Band £175K were frozen until April 2030.
Advising clients on IHT changes
With IHT being hit from all angles, advising clients (both non-doms and UK-domiciled individuals) on what to do now is essential. Here’s my advice on what actions could be taken:
1) Review succession plans
All individuals should be advised to review their succession plans in full from April 2025. Clients should consider transferring assets. However, they need to take advice about the impact of this on both their financial position and Capital Gains Tax (CGT).
2) Trusts
Under current proposals, unrestricted BPR/APR is still available for lifetime gifts put into trust up to April 2026.
Trusts have a £1m allowance for BPR/APR relief, so gifting into a trust will add a further £1m of available BPR/APR relief and remove future growth from the estate.
For non-domiciles, a trust’s IHT status will also depend on the long-term residence status of the settlor.
Clients with offshore trusts should be advised to seek professional help on the implications. Those considering setting up a trust should carefully assess whether the benefits outweigh the costs.
3) Family Investment Company / Growth Shares
By using a Family Investment Company (FIC) or growth shares, business owners can pass value growth onto the next generation (and retain control over assets), potentially limiting future IHT liabilities.
4) Gifts
Lifetime gifts continue to be a tax-efficient IHT strategy. If the donor survives for seven years after the gift, the asset’s value is excluded from the estate for IHT purposes. Lifetime spousal gifting could secure two lots of the £1m APR/BPR allowance.
5) Life insurance
Life insurance can help to meet IHT obligations without disrupting or risking business operations.
SDLT Changes
From April 1, 2025, Stamp Duty Land Tax (SDLT) rates will revert as the temporary 2022 measures expire, affecting both first-time buyers and those moving homes. The changes are as follows:
- The nil rate threshold (currently £250,000) will return to the previous level of £125,000.
- The nil rate threshold for first-time buyers (currently £425,000) will return to the previous level of £300,000.
- The maximum purchase price of the property for which First-Time Buyers relief can be claimed (currently £625,000) will return to the previous level of £500,000.
On 31 October 2024, the SDLT surcharge on the purchase of additional properties by individuals and companies rose from 3% to 5%.
Transitional rules apply if the contract was signed on or before 30 October 2024, but the purchase is completed later, the higher tax rates will still apply but at 3%.
Advising clients on SDLT changes
Where possible, advisors should seek to complete transactions before the changes come into effect from 1 April 2025.
In the past, there have been many cases where clients have had incorrect assessments and SDLT returns completed. Advisors need to ensure that clients seek advice where necessary from qualified tax professionals.
The importance of professional tax advice
Law firms should encourage clients to seek professional tax advice from qualified tax advisors, before undertaking any changes for IHT and SDLT purposes.
dns accountants
DNS House,
382 Kenton Road,
Harrow, Middlesex,
HA3 8DP
0333 2422 572
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