Apart from the pension changes, which Ian Dowdell explains in his blog of 20 March 2023, the budget itself was pretty uneventful.

However, there were some announcements affecting inheritance tax (IHT) and trusts which were not specifically mentioned. I assume this is on the basis that they do not come into effect immediately.

The first of these was that the government intends to restrict Agricultural Property Relief (APR) and Woodlands Relief to property in the UK only. This will result in a property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man being excluded from these reliefs from 6 April 2024. It seems to me that this is quite a major change, given that where the conditions for APR are met, it can relieve up to 100% of the value of land and buildings from inheritance tax. Woodlands relief, whilst not so generous as it only applies to the value of trees and under-wood on the land and only defers the tax, can also be valuable, in the right circumstances.

The government also intends to make changes to the IHT regulations over the coming year to remove some non-taxpaying trusts from certain reporting requirements. No details have been given at present but personally I am hoping that this means that if there is no inheritance tax payable when assets leave a trust or at the tenth anniversary, they will remove the need to complete inheritance tax forms. These forms are time consuming to complete and I am not sure what the benefit is to HMRC where there is no tax at stake.

Other minor announcements were that any trust or estate that has income in any one tax year of up to £500 will not pay tax on that income. Prior to the budget this exemption only applied where the income received was interest. The income limit is reduced if a person has created more than one trust. Realistically, how many trusts and estates will benefit from this change ? It still means that some trusts and estates will need to pay tax on relatively small levels of income because the limit is so low.

Finally, with effect from 6 April 2024, the basic rate tax rate that applies to the first £1,000 of income arising in a discretionary trust will be abolished, meaning that all the income in a discretionary trust is taxed at the penial higher trust tax rates, so as much as 45% or 39.35%.

If you want to discuss any of the above changes, and how they may affect you, please get in touch.