Martin Lewis says Inheritance Tax update 'big change' in Autumn Budget 2024 - updates explained

Labour's Rachel Reeves has today (October 30) announced major changes to Inheritance Tax during the Autumn Budget 2024. Delivering the party's first Budget in 14 years, the Chancellor said it will raise taxes by £40bn, telling the Commons that any chancellor would "face the same reality" adding any “responsible chancellor would take action".

Speaking specifically about Inheritance tax, she revealed that only 6% of states will pay inheritance tax this year stating: "I understand the strongly held desire to pass down savings to children and grandchildren so I’m taking a balanced approach in my package today."

Currently, the form of tax on the estate of someone who has passed away is charged at 40% on the property, possessions and money of the person who has died above the £325,000 threshold. Everybody gets a £325,000 inheritance tax-free allowance meaning if the value of the estate - or anything that doesn't go to a spouse or civil partner - is below £325,000, there's no inheritance tax to pay.

Its' worth noting this is only charged on the part of the estate that lies above the threshold so if, for example, the estate is worth £335,000, the tax would apply to the additional £10,000.

The Tory government froze inheritance tax thresholds until 2028 with Reeves announcing she will "extend that freeze for a further two years until 2030. That means the first £325,000 of any estate can be inherited tax free, rising to £500,000 if the estate includes residence passed to direct descendants and £1 million when a tax free allowance is passed to a surviving spouse or civil partner.

"Second, we will close the loop hole created by the previous government, made even bigger when the lifetime allowance was abolished by bringing Inheritance Pensions into Inheritance Tax from April 2027" adding she will reform Agricultural Property Relief and Business Property Relief.

She continued: "From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief, at an effective rate of 20%" adding that they will ensure "we continue to support small family farms with three quarters of claims unaffected by these changes."

Concluding the update, she further announced: "I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the Alternative Investment Market (AIM) and other similar markets, setting the effective rate of tax at 20%. Taken together these measures raise over £2 billion by the final year of the forecast."

Tweeting about the changes, Money Saving Expert (MSE) founder, Martin Lewis, wrote that's it's a "big change" saying on X: "Just to say the "inheritance pensions will be brought into inheritance tax from 2027" is a big change - i'm going to explain more about who this impacts after the budget speech is over."