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Key takeaways for Private Clients from the first Budget of the new Labour Government

on Wednesday, 30 October 2024.

Impact on Private Clients: Increased Taxes on Inheritance, Capital Gains, and Domicile Rules

The first Budget of the new Labour government and the first to be delivered by a female Chancellor was expected to bring in some significant changes for private clients, and it certainly did that.

The changes to the non-dom regime were cemented with an increase in the levies on travelling by Private Jet - perhaps the government's last ditch attempt to get money our of ultra-high net worth individuals before they leave the country for good.

Inheritance tax

There are a number of changes to the inheritance tax regime. The most significant is that pensions are to be brought within the inheritance tax net from 6 April 2027 meaning that any value that can be passed on after death will now be considered part of an individual's estate and taxed accordingly. Advice in recent years has been to, where possible, spend other investments and to leave pensions, such as SIPPs untouched, so that they can be passed on to the next generation without inheritance tax being payable. That will now change.

There are also changes coming in to business property relief (BPR) and agricultural property relief (APR). It is currently possible to pass on unlimited business and agricultural assets free of inheritance tax where the criteria for obtaining these reliefs is met. From April 2026 100% relief will be available only on the first £1m of combined assets, thereafter there will be only 50% relief, which will come as a blow to farmers and business owners alike. Relief on shares listed on the Alternative Investment Market (AIM shares) will also be reduced to 50% (from 100%) from the same date.

There will be no changes to the nil rate band and residence nil rate band (the tax free allowances for inheritance tax) until 2030.

Capital gains tax

The much trailed rise in capital gains tax is actually less painful than expected with the rates increasing to match those already applied to residential property. Instead of 10% and 20% rates for sales of investments the rates will rise, from tonight, to 18% and 24%. The rates for residential property are not changing at all and there is no change to the £3,000 allowance.

Domicile rules

The changes to the domicile regime had largely been announced earlier in the year. The Budget confirmed that the concept of domicile will be abolished and replaced by a residence based scheme, meaning that after four tax years in the UK all residents will be liable to pay income and capital gains tax on their worldwide income and gains and after 10 tax years they will pay inheritance tax on their worldwide estate. The use of offshore trusts to shelter assets from inheritance tax will end. The planned 50% tax reduction for foreign income in the first year of the new regime, proposed by the previous government, has been scrapped.


If you would like advice on any of the subjects covered in this blog, please contact Angharad Lynn in our Private Client team on 07500 042 044. Alternatively, you can fill out the form below.

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