15 Mins
Looking ahead to the Autumn Budget
With the Autumn Budget due on 28th October, there is inevitably plenty of speculation about what the Chancellor may announce.
Recent reports suggest that a general increase in Capital Gains Tax rates is now unlikely. This may come as a relief to anyone who has been considering selling a property, investment or business. However, until the Chancellor delivers the Budget and the supporting documents are published, nothing is certain. Even if the headline rates remain unchanged, there could still be changes to particular reliefs, allowances or the way certain assets and transactions are taxed. [which.co.uk], [telegraph.co.uk]
Budget rumours can create pressure to act quickly, but rushing into a transaction purely because of speculation is rarely sensible. Tax is only one part of the decision, and a sale, gift or restructuring can have wider financial, legal and practical consequences.
For most people, the best preparation is therefore to understand their current position and consider whether any plans already under discussion could be affected.
The Henderson Loggie team will be watching the Budget closely and will share our analysis of the announcements. We are also hosting a post-Budget webinar on Friday 30th October, where we will discuss the key changes and what they could mean for you.
Inheritance Tax: a quick family health check
We have written quite a bit about Inheritance Tax recently, and with good reason. Changes affecting businesses, farms and pensions mean that more families may find themselves facing an Inheritance Tax bill, including some who would not previously have expected one.
Rather than revisiting all the detailed rules, here is a short reminder of the key points and some practical questions for families to consider.
Could Inheritance Tax affect your family?
Inheritance Tax is often associated with the very wealthy, but a family home, savings, investments, business interests and pensions can soon add up to a substantial estate.
The standard nil-rate band is £325,000 and has remained at that level since April 2009. An additional residence nil-rate band of up to £175,000 may be available when a qualifying home passes to children, grandchildren or certain other direct descendants.
These allowances have not kept pace with increases in property prices and other asset values. As a result, more families are being brought within the scope of Inheritance Tax, even where their circumstances may not have changed significantly.
Unused allowances can often pass between spouses and civil partners, which is why it is sometimes said that a couple can leave up to £1 million without Inheritance Tax. However, that figure will not apply in every case. The residence nil-rate band has a number of conditions and is gradually restricted for estates worth more than £2 million.
It is therefore worth understanding which allowances are actually available rather than assuming the full amount will apply.
Pensions and Inheritance Tax from April 2027
One of the most significant forthcoming changes concerns pensions.
At present, pension funds can often be passed to beneficiaries outside the estate for Inheritance Tax purposes. This has led many people to use other savings and investments during retirement while preserving their pension to pass on to the next generation.
For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be included in the deceased person’s estate for Inheritance Tax purposes. This could bring some estates into the Inheritance Tax net for the first time and increase the liability for others.
The change may be particularly important where someone has a valuable home, investments and a substantial pension fund. Even if the estate was comfortably within the available allowances when it was last reviewed, including the pension could produce a very different result.
However, this does not mean that withdrawing money from a pension will automatically be the right answer. Pension withdrawals can create an Income Tax liability, and money withdrawn but not spent will usually remain part of the individual’s estate in another form.
Pension and estate planning should therefore be considered together, taking account of retirement needs, other assets, family circumstances and the position of the intended beneficiaries.
What should your family consider?
A useful family health check should bring together the financial position and the practical arrangements. Questions to consider include:
- What would our property, investments and business interests be worth today?
- How much is held in pensions, and how could the April 2027 changes affect the overall estate?
- Do we understand how the changes to Business Property Relief and Agricultural Property Relief could affect us?
- Have we made substantial gifts, and do we have a clear record of them?
- Does our will still reflect our current family circumstances and wishes?
- Are life assurance policies and pension nominations set up appropriately?
- If an Inheritance Tax bill arose, where would the money come from?
- Would our executors and family know where to find the information they need?
These conversations are not always easy, but leaving everything for executors and beneficiaries to resolve after a death can create uncertainty at an already difficult time. A good advisor will help you have these conversations.
Planning is about more than reducing tax
Good estate planning should not begin with a complicated tax arrangement. It should start with understanding what you own, who you want to benefit and what you would like to happen to your property, investments or family business.
For some families, a review will identify opportunities to reduce a future liability. For others, the priority may be updating a will, improving record-keeping, reviewing pension nominations or arranging suitable funding for the tax.
Sometimes the most valuable outcome is simply the reassurance that the existing arrangements remain appropriate.
Any planning should also leave you with sufficient income and assets for your own future needs. Tax is an important consideration, but it should not drive decisions that do not otherwise work for you and your family.
Our Inheritance Tax Review Service
Our Inheritance Tax Review Service is designed to give individuals and families a clearer understanding of their current position.
We will bring together information about your assets, liabilities, pensions, family circumstances and existing arrangements. We can then assess your approximate estate value, consider the allowances and reliefs that may be available and explain how recent and forthcoming changes could affect you.
The IHT review can help identify:
- whether an Inheritance Tax liability may arise;
- the effect of including pensions from April 2027;
- whether business or agricultural reliefs may be relevant;
- areas of uncertainty or potential risk;
- whether the estate has enough accessible funds to meet a future liability; and
- any sensible next steps for the family to consider.
The purpose is not to recommend planning for the sake of it. It is to provide a clear picture of the current position so that you and your family can make informed decisions.
Moving to or from the UK? The international tax issues to consider
Living internationally can be exciting, but it can also make personal and family tax affairs considerably more complicated.
Moving to or from the UK can affect more than your Income Tax position. It may also have consequences for Capital Gains Tax, Inheritance Tax, pensions, trusts and the taxation of income or gains arising overseas.
Holding assets in more than one country adds another layer of complexity. Different countries may apply different rules to the same income, asset, gift or estate, and the outcome may depend on residence, citizenship, domicile, the location of the asset and any relevant tax treaty.
It is therefore important to consider the overall position before moving, making a significant gift or changing how assets are owned.
Residence is the starting point
UK tax residence is determined separately for each tax year under the Statutory Residence Test.
The number of days spent in the UK is important, but it is not the only consideration. UK homes, work patterns, family connections and the amount of time spent in other countries can all affect the result.
Someone coming to or leaving the UK may qualify for split-year treatment, meaning that the tax year is divided into a UK part and an overseas part for certain purposes. However, split-year treatment does not apply automatically and does not affect every type of income or gain in the same way.
Keeping an accurate record of travel dates, working days and the use of homes is therefore essential. Trying to reconstruct this information several years later can be difficult.
Inheritance Tax now follows residence history
Since 6 April 2025, the UK Inheritance Tax treatment of overseas assets has been based primarily on an individual’s residence history rather than the previous domicile-based system.
An individual will generally be a long-term UK resident if they have been UK resident for at least 10 of the previous 20 tax years.
Long-term UK residents can be within the scope of UK Inheritance Tax on their worldwide assets. Individuals who are not long-term UK residents will generally be within scope only on UK assets, although particular rules can apply to trusts and assets linked to UK residential property.
This means that someone coming to the UK may eventually bring their overseas estate within the UK Inheritance Tax system, even if they continue to regard another country as their permanent home.
Leaving the UK does not end the exposure immediately
Someone who has been a long-term UK resident may remain within the scope of UK Inheritance Tax on worldwide assets after leaving the country.
This continuation period is sometimes called the Inheritance Tax “tail”. Its length depends on the individual’s UK residence history and can range from three to ten tax years.
As a result, becoming non-UK resident for Income Tax and Capital Gains Tax does not necessarily mean that overseas assets have also fallen outside UK Inheritance Tax.
There are transitional provisions for some people who left the UK before 6 April 2025, so the precise dates and residence history need to be checked.
Gifts and trusts need particular care
Residence status at the time a gift is made can affect its UK Inheritance Tax treatment.
A gift of an overseas asset made while the donor is not a long-term UK resident may be treated differently from one made after the individual has come within the worldwide scope of UK Inheritance Tax. Equally, leaving the UK before making a gift does not necessarily take it outside the UK rules if the donor remains within the Inheritance Tax tail.
Transfers involving trusts require particular care. The tax treatment can depend on:
- when the trust was established;
- when assets were added;
- where the assets are situated;
- the residence history of the settlor;
- the residence of the trustees and beneficiaries; and
- whether the settlor or their family can continue to benefit.
A trust that was established under the old domicile-based rules should not automatically be assumed to retain the same treatment following the introduction of the residence-based regime.
Advice should therefore be taken before adding assets, making distributions or changing existing trust arrangements.
International couples may have additional issues
Transfers between spouses and civil partners are generally exempt from UK Inheritance Tax where both are long-term UK residents.
The exemption can be restricted where assets pass from a long-term UK resident to a spouse or civil partner who is not a long-term resident. An election may be available to obtain the full exemption, but making it can bring the recipient’s worldwide assets within the UK Inheritance Tax system.
The election should therefore not be made simply to deal with one transfer. The couple’s worldwide assets, future residence plans and exposure in other countries all need to be considered.
International couples should also ensure that wills prepared in different countries work together. Separate wills may be appropriate, but they need to be coordinated so that one does not accidentally revoke or undermine another.
The same asset may be taxed in two countries
A person can be treated as a tax resident in more than one country under each country’s domestic rules. The same income, gain, gift or estate may therefore come within two tax systems.
A double-taxation agreement may help establish which country has primary taxing rights and how relief should be given. However, the UK has specific Inheritance Tax treaties with only a limited number of countries.
Where no treaty applies, unilateral relief may still be available, but this will not necessarily remove every difference between the two tax systems.
Coordinated advice is important because planning that works well in the UK may have an unexpected tax, legal or reporting consequence overseas.
Planning an international move
Ideally, tax advice should be taken before the move takes place. The timing of a disposal, dividend, pension withdrawal, gift or trust transaction can make a significant difference.
Before moving to or from the UK, it is worth reviewing:
- your recent UK residence history;
- anticipated travel and working patterns;
- the location and ownership of your assets;
- overseas income and gains;
- shares, options or remuneration connected with employment;
- pensions held in the UK or overseas;
- existing trusts and planned gifts;
- wills and succession arrangements in each country;
- the position of your spouse or civil partner; and
- the tax treaties that may apply.
International planning is not solely about reducing tax. It is also about understanding where returns or disclosures will be required, avoiding unexpected charges and making sure that arrangements remain practical across every country involved.
If you are planning to move to or from the UK, or have family, assets or trusts in more than one country, our Private Client Tax team can help you understand the UK position and work alongside advisers in the other relevant jurisdictions.
How we can help
This newsletter provides a general overview, but everyone’s tax position is different. The appropriate treatment will depend on your personal circumstances, the assets involved and the legislation in force at the relevant time.
If you would like more information about any of the topics covered in this newsletter, including our Inheritance Tax Health Check, or need advice on another personal or family tax matter, please get in touch with our Private Client Tax team.
We would be happy to discuss your circumstances, explain how the rules may apply and help you decide whether any further action is appropriate.
