Harold Stephens’ Post

A great update from Jonathan Jacobs following the Autumn Budget. For us contentious practitioners, I'm now considering how the unused pension fund and lump sum death benefit will impact the shape of settlements going forward. Watch this space!

The Autumn 2024 budget has introduced significant inheritance tax (IHT) changes that will affect estates, pensions, family businesses and investments. With nil rate bands now frozen until 2030, many families may face increased IHT exposure. The new rules will also bring IHT implications for unused pension funds starting in 2027 and reduce relief on agricultural property, business assets and certain shares beginning in 2026. Additionally, updates to the definition of 'residence' for IHT could impact offshore trusts and international assets, while digitalised IHT filing is on the horizon. Jonathan Jacobs, a Partner in our Private Client team at Morr & Co, breaks down these changes and explores how these developments may impact estate planning. https://lnkd.in/es5wpCWX #inheritancetax #autumnbudget #IHT #agriculturalproperty #pensions #estateplanning #nilratebands #labourbudget #budget2024

Bringing pensions into IHT will likely disrupt the pensions industry and impact those relying on pensions for tax-efficient wealth transfer. While it’s expected to increase tax revenue, it may not yield immediate benefits. This change risks shifting savers away from pensions, potentially reducing future tax receipts and undermining confidence in pensions as a retirement asset. A deeper assessment of its long-term impact is essential before moving forward!

I've always managed to understand things more clearly once I've "run the numbers". So, I thought I'd do exactly that for the IHT changes in the budget. In short, I'm: - very concerned about how successful family run businesses and farms will fund their IHT liability without significant lifetime planning; and - worried about the effect that putting pensions inside the scope of IHT will have on taper relief. You can check my workings here: https://lnkd.in/e7tZnxhZ Let me know what you think!

Like Orlando Beckett TEP, having a look at the numbers on the impact of the recent Budget really highlights the scope of the changes for me. Really useful article, thanks Orlando.

Significant changes to Inheritance Tax were announced in the Autumn Budget, with reforms to Business Relief and Agricultural Relief and new rules for pensions set to take effect in the coming years. In part 3 of our ‘Unpacking the Budget’ series, Matthew Spencer, Director, provides clear insights into what has changed, what remains the same, and the key steps you should considering. https://lnkd.in/e49giVma #inheritancetax #estateplanning #budgetupdates

What could the autumn budget mean for your finances? Take a look into our latest magazine. #autumnbudget #pensions

If your estate could be liable for Inheritance Tax (IHT), then considering how to use your pension to leave wealth to your loved ones could be valuable. IHT is a tax paid on your estate - that is, your total assets - when you pass away if its total value exceeds certain thresholds. But, as pensions typically sit outside of your estate, they may be a useful way to pass on wealth without increasing a potential IHT bill. You may want to consider IHT and how you could use your pension as part of your estate plan if: ➡️ The value of your estate exceeds the nil-rate band. For the 2024/25 tax year, the nil-rate band is £325,000 and it’s frozen at this level until April 2028. You may also be able to use the residence nil-rate band if: ➡️ You leave your main residence to direct descendants. This allowance is £175,000 in 2024/25 and, again, is frozen until 2028. You can pass on unused allowances to your spouse or civil partner. So, when you’re planning as a couple, you may be able to pass on up to £1 million before IHT is due. If your estate exceeds these thresholds, the standard rate of IHT is 40% and it could substantially reduce the inheritance your loved ones receive.

Pensions are an important wealth planning tool as they are outside of your estate for inheritance tax purposes. They are also one of the most efficient

Many of us have received a lump sum inheritance which has helped to achieve some of our long-term life goals. It can change a family’s fortunes, help you become mortgage-free, or send your children or future grandchildren to a good university. But when it comes to passing your own money on to your children and grandchildren, it can be hard to accept that a lot of your money may not reach those you love because of the amount of IHT payable on your assets. To help you start planning – here are the top 5 things to know about IHT: 1. Preparing for Inheritance Tax can change your family’s future 2. The first £325,000 – known as the nil-rate band – of the inheritance you leave, is tax-free. 3. Gifting can mitigate IHT, and help support your family now, rather than making them wait for an inheritance. 4. Most Defined Contribution pension schemes will fall outside of your estate, so if you’re looking for a tax-efficient way to pass on wealth, pensions could play a big role. 5. Trusts are a tried and tested tool in IHT planning, and they’re still a good way to ensure the right people benefit at the right time. Speak to your financial adviser about maximising the inheritance you leave to your loved ones, and minimising the tax they’ll pay on it.