The Spring Budget 2024

The Spring Budget 2024

The chancellor unveiled his much anticipated Spring budget. Perhaps unsurprisingly, despite much speculation to the contrary, there was no direct mention of inheritance tax. The headline tax related announcement was the 2% cut in National Insurance contributions, with announcements about other capital taxes, but inheritance tax did feature in one particular area.

Capital gains tax

The higher rate of capital gains tax paid on disposals of residential property will be reduced from 28% to 24%, from April 2024. The rationale for this seems to be to invigorate the residential property market, but given that CGT is largely only paid on the disposal of second properties (due to the private residence relief that usually applies to the disposal of an individual’s main residence), how invigorating this change will be is unclear.

Stamp Duty Land Tax

Multiple Dwellings Relief, a stamp duty relief for individuals who purchase more than one dwelling in a single transaction, will be abolished from June of this year. However, where contracts have been exchange prior to 6 March 2024, transactions will continue to benefit from the relief irrespective of the completion date. The government has made this change because the relief has shown no evidence of promoting investment in the private rented sector and the change is expected to raise £385 million a year.

Non-dom tax status

Non-dom status will be abolished and replaced from April 2025 by a ‘fairer system’ which will be based on an individual’s residence. This will mean foreign nationals who live in the UK but are domiciled overseas will become liable for income tax and capital gains tax on their worldwide income and gains once they have been resident in the UK for four years. This is predicted to raise £2.7 billion a year by 2028/29.

Whilst the focus on non-doms was largely on income tax and capital gains tax, the government has also announced that the residence-based system is intended to cover inheritance tax too. However, the government will embark on a consultation process around the changes and how they will affect inheritance tax, but the technical paper containing the proposals makes for interesting reading and, if implemented, will bring about significant changes in the inheritance tax treatment of non-doms.

The question is, given the speculation around whether inheritance tax would feature significantly this time round, and the various reports that have been produced by the likes of the Office of Tax Simplification in recent years, is this the start of a major review?

Although inheritance tax produces a small percentage of the overall revenue received by the government, the figures published suggest that the number of estates paying inheritance tax each year is increasing; as is the total inheritance tax received. This is only likely to continue given the nil-rate band (the ‘tax free’ element of an individual’s estate) has been frozen at £325,000 since 2009, and will remain frozen at that level until 2028.

Therefore, it is important that those whose estates are potentially liable for inheritance tax plan now to see what can be done to mitigate any inheritance tax bill in the future.

Contact Us

If you need guidance when it comes to inheritance tax, reach out to our Wills, Estate Planning and Trusts team, or contact Bruce Clarke, Partner via e. bruceclarke@rixandkay.co.uk or t. 01732 440 853 or Jessica Pointing, Solicitor, via e. JessicaPointing@rixandkay.co.uk or t. 01825 745 361