The UK budget 2024 - complexity and change for people’s estates

Aleks Tomczyk, Co-Founder & Managing Director of Exizent

Aleks Tomczyk, Exizent’s Co-Founder and Managing Director, shares his thoughts on the recent UK budget announcements and their implications for estate planning, estate administration, and inheritance tax (IHT). Below, Aleks examines the potential changes and challenges that professionals and families may encounter with the new policies, offering insight into how Exizent can contribute to streamlining the inheritance tax process.

The new UK government’s first budget has brought with it huge changes that will significantly increase the number of deceased estates (or beneficiaries) paying inheritance tax (IHT) and, based on the figures presented, result in over £1.135 billion of new taxes to be  paid in  2027-28. However, as always, whether these projections will be fully realised remains to be seen.

Key Sources of New IHT Receipts

Looking at what HMG has published sees that the vast bulk of new IHT receipts are forecast to come from individuals’ pension funds, business and agricultural reliefs, with an un-broken down amount from the new ‘residence based’ IHT qualification regime for non-domiciled individuals, which will also impact trusts. In addition, the continued freeze on thresholds will contribute to the widening reach of IHT.

Challenges Ahead for Estate Planning and Administration

From an estate planning and estate administration (probate, executry) perspective there is much detail to be published, reviewed, discussed and clarified in the coming period. What is clear, however, is that there will be a vast amount of complexity to be navigated over the next few years of transition. There will no doubt be upset and frustration amongst people/families impacted as some established principles have been discarded. For instance, some may feel fixed contribution pensions are being unfairly targeted. Fixed contribution pension saving may be reduced in favour of other investments, or money could just be spent whilst alive. The fact that pension administrator will have to pay the IHT direct to HMRC is interesting and additional operational/compliance work for businesses.

Positive Changes in IHT Digitalisation

There was a much welcome – but under-reported in my view – piece in the budget in the ‘Closing the tax gap’ section:
“Inheritance Tax digitalisation – The government will invest £52 million to digitalise the inheritance tax service from 2027-28 to provide a modern, easy-to-use system, making returns and paying tax simpler and quicker.”

I look forward to more detail and hopefully excellent execution. As someone both experienced delivering technology driven change and close to the current state and complexity of the domain, it is difficult to envisage a full scope of transformation for that money though.

So where should initial IHT digitisation efforts focus?

The data is key. I would start by getting the IHT forms that are being issued today and changed ones as a result of the Budget announcements correct (today we often find ourselves highlighting bugs to HMRC and/or compensating for them in our platform to enable auto completion of IHT forms). Secondly, implementing API submission of forms so that much of the automation heavy lifting can be done in the commercial space is a good idea – leaving HMRC to check submissions. Project approach here is key to a cost efficient and effective process, the work should be conducted in collaboration with the probate industry – working together is the fastest route to a quality outcome.  

Exizent’s Commitment

Exizent would love to help, we have a modern, data-driven platform with a robust data model which we would be happy to share. We would help HMCTS and HMRC on this journey if we get a chance – as it would be good for us, our many hundreds of users and for their clients – the citizens who have lost a family member and who really matter here.

In the meantime, we will focus on updating and auto-populating the inevitable new IHT forms reflecting the Budget changes in our platform just as quickly as we can once they are released. That way we can deal with the tech whilst our users can focus on advice and their clients.

But don’t worry, we will still feedback anything we find wrong to the HMRC!

Broader Implications of the Budget

Questions remain about the broader, cultural impacts of these Budget measures. For example, after years of encouraging people to save into pensions, will the result be greater future burden to the state as people spend in life rather than save? What impacts will the National Insurance (NI) changes have on jobs, wages, and economic growth?  If farmers are forced to liquidate fixed assets or reduce capital expenditure to pay IHT bills, could this lead to reduced food security and environmental impacts? Moreover, what will be the impact on productivity (already poor in international comparison) of reducing incentives to build larger businesses? Will the new definitions of eligibility for IHT based on residence work in practice? What will the impacts of the changes to trusts be?

Only time will tell!