Autumn Budget 2024 – Tax round up

£40 Billion! Wow. That is an enormous tax hike in a single Budget, the highest in 30 years.

If it were the case that this was likely to be a ‘one-off’ in order to solve the underlying problem, then a tax hike of that proportion would be acceptable. The fear (and according to the Institute for Fiscal Studies, the likelihood) is that this is not the case and the more likely scenario is that either another hike of similar magnitude will need to be repeated within the forecast period, or there will need to be very significant spending cuts – or possibly both. From a personal point of view, working as a Tax Advisor in East Anglia with a substantial number of farming clients, I was left somewhat numbed by the announcement that the value of a business that can benefit from 100% Agricultural Property or Business Property Inheritance Tax Relief was to be capped at £1 million, with any value greater than that getting relief at 50%.

I am sure that in Westminster they had not given thought to the fact that there are some businesses that might have high asset values but generate proportionately little income. The assumption appears to have been that any business of that value would easily be able to generate sufficient profits to pay the IHT, particularly as the bill can be spread over 10 years!

That will not be the case for many farms, the IHT bills arising are unlikely to be affordable without either splitting up the farm (making it less viable) – or selling the business.

It is strongly arguable that a change to IHT reliefs was needed – there have been consistent mentions of the super-rich benefitting from the reliefs to an unacceptable degree – but these changes feel badly thought through. There is certainly a missed opportunity to have had a wider review of Inheritance Tax and implement a modern fairer system. Had that been done I am certain that the proposed new rules are not where we would have ended up.