Budget 2024 & SMEs – Navigating Changes For Business Exit, Family Investment Companies & SSAS: Insights from Our 5th TAX NAV Webinar

In the ever-evolving landscape of tax legislation, staying informed is crucial for businesses and individuals alike. Our recent 5th TAX NAV webinar provided a comprehensive overview of the latest changes announced in the Budget 2024 and their implications, particularly focusing on inheritance tax, capital gains tax, and pensions. Here are the key takeaways from the session.

Understanding The Budget 2024 Changes

We kicked off the webinar with a summary of the Budget 2024 changes, emphasising that this session was not about the minutiae of legislative updates, but rather their practical impacts. Our focus was on revisiting previous case studies to see if the advice given then still holds or needs adjustment.

Inheritance Tax: The Big Whammy

One of the most significant changes we discussed was the alteration in inheritance tax (IHT) rules. From April 2026, the 100% relief for business property (BPR) and agricultural property (APR) will only apply to the first £1 million of combined property value. This change is set to have a massive impact on clients with substantial business or agricultural assets, potentially increasing their IHT exposure significantly.

For many of our clients, who are often entrepreneurs and family businesses, this change means a substantial increase in potential tax liabilities. Clients who previously had a potential IHT exposure of under £100,000 may now face tax liabilities with some in excess of £5 million. This shift has prompted a surge in inheritance tax planning enquiries, as clients seek to understand and mitigate the impact of these changes.

Pensions Back In The IHT Estate

Another major change is the inclusion of pensions in the IHT estate from April 2027. Previously, pensions could be passed on free of IHT and any other taxes, if the pension holder died before the age of 75. The new rules mean that pensions will now be included in the estate for IHT purposes, which could lead to substantial tax liabilities for beneficiaries.

The basic rules currently allow most pensions to be inherited tax-free if the pension holder dies before aged 75. If the pension holder dies after 75, the beneficiary pays income tax on withdrawals at their marginal rate. The new legislation will change this, making pensions part of the estate for IHT purposes. This change is not a matter of if, but how, as the Government is currently consulting on the specifics of implementation.

Capital Gains Tax Adjustments

We also covered changes to capital gains tax (CGT). The rates have been adjusted to 18% for lower-rate taxpayers and 24% for higher-rate taxpayers. Additionally, the business asset disposal relief rate will increase from 10% to 14% next year and 18% the year after. These changes will affect how business owners plan their business exits and manage their investments.

The adjustments to CGT rates mean that business owners will need to carefully consider the timing of their asset disposals. The increase in rates for business asset disposal relief, in particular, will impact those looking to sell their businesses. Planning ahead and understanding these changes will be crucial for minimising tax liabilities.

Revisiting Case Studies

We revisited several case studies from previous TAX NAV webinars to illustrate how the Budget 2024 changes impact different scenarios:

1. Business Exits and Employee Ownership Trusts: Our advice remains largely unchanged, with employee ownership trusts still being a viable option for business exit. However, the timeline for disqualifying events has been extended, and offshore trustees are no longer allowed. This means that while the structure remains beneficial, clients need to be aware of the extended timelines and new restrictions.
2. Family Buyout: This strategy is expected to become more popular due to the changes in business property relief (BPR) and agricultural property relief (APR). The family buyout allows business owners to pass on their business to the next generation in a tax-efficient manner, freezing the value of their estate and reducing IHT exposure. Given the new £1 million cap on BPR and APR, early planning and structuring will be more important than ever.
3. Family Investment Companies: These remain an attractive option for managing family wealth, especially given the changes in CGT rates. The structure allows for tax-efficient growth and control over family assets. By using a family investment company, clients can benefit from corporate tax exemptions on investment income, while retaining control over the assets.
4. Small Self Administered Schemes (SSAS): Despite the inclusion of pensions in the IHT estate, SSAS remains a valuable tool for business owners. The ability to pool funds, loan back to the sponsoring company, and manage commercial property within the SSAS pension scheme continues to offer significant tax advantages. The flexibility of SSAS allows for strategic planning to mitigate the impact of the new IHT rules.

Conclusion

Our 5th TAX NAV webinar provided valuable insights into navigating the latest tax changes and feedback from our large audience has shown that until primary legislation is seen managing client concerns and enquiries will be challenging.

For business owners, SMEs, entrepreneurs, and high-net-worth individuals, understanding these changes and planning accordingly is essential. Whether it’s through revisiting existing strategies or exploring new ones, staying ahead of the curve will help mitigate potential tax liabilities and ensure financial stability.

At WBR, we are committed to helping our clients navigate these complex changes.

Our team of experts is ready to provide personalised advice and support tailored to your specific needs.

Contact us today – we are ready to talk.