Anti-forestalling measures
The government has introduced anti-forestalling rules so that any transfer made on or after October 30 2024 will be caught by the restricted reliefs if the donor dies after April 6 2026 and within seven years of the gift.
This is an important point, no doubt, but if the donor implements the strategy in enough time and survives seven years then planning can still be effective.
This is, of course, subject to the donor retaining sufficient value and comfort for their own retirement, and a careful balance will need to be struck.
Life assurance (if affordable) can also help protect against the seven-year period of IHT risk following a gift, and we expect this to be increasingly important as part of an overall succession strategy.
We must also not forget that 100 per cent relief will continue to apply to the first £1mn of business or agricultural property.
This 100 per cent relief appears to apply per person and so it could be necessary for married couples to equalise assets, and to ensure that any relief is 'banked' via their wills on the first death. This is an important planning point, as the government have indicated that the relief is not transferrable on death. Existing wills should be reviewed.
Gifts to children and wider family (with a view to spreading the IHT risk) may also become more attractive, although this would have to be very carefully balanced with maintaining sufficient control from an estate planning perspective.
It could ultimately lead to more fragmented ownership (and therefore risk), although partnerships and corporate structures could also play an important role as robust asset holding vehicles in this respect.
Existing trusts (those created prior to October 30 2024) also appear to have a part to play; the government guidance suggests that they too will have an available £1mn relief.
We have been told that the government is consulting on precisely how the restrictions will apply to trusts. Clarification would be helpful, so that careful thought should be given as to how to maximise these reliefs as far as possible using existing structures.
Incidentally, there were no amendments to the IHT spousal relief, or the CGT uplift on death. Pre-Budget, many were concerned about their possible removal or restriction. These remain powerful estate planning tools that, in the right circumstances, can be used to mitigate the effect of these changes.
Balfour
For landed estates, it looks like Balfour planning (where estates are structured as a composite trading business), will continue to be a key part of tax and succession planning.
