Jacqui Lazare and Tom Chiffers, partners in Clarke Willmott’s private capital team, look at the key highlights from the Autumn Budget and the tax implications for private individuals

Some commentators had, in the run-up, likened this Budget statement to an election Budget and it didn’t help overall levels of uncertainty and market jitters that it was pushed back a month. Everyone would agree that Rachel Reeves was under a lot of pressure to deliver something that provided reassurance to markets and appeased her backbenchers. So far, so typical.

After all the build-up the actual content has been something of an anti-climax from a private client perspective, nay, even broader perspective – but many people are ok with that!

This is because the Budget has been made up mostly of small adjustments across the board and has been broadly well received by the markets – to the extent that its contents were not as bad as some had feared.

There was a particularly favourable reaction to the borrowing forecasts (to which we, currently, compare favourably against the US not to mention the rest of the G7). The pound enjoyed a small bounce against the US dollar on Wednesday afternoon as a result and bond markets were confident. This means that the stability that everyone was hoping for was delivered. The markets remained stable and that is good for the economy and for everyone. So, it could be said that there is not much for us to comment on from a private client perspective.

However, there are some interesting points to take away from Wednesday’s Budget especially taken together with the ripple effects of the October Budget last year. As part of our work, we advise clients on their estate planning including through the use of trusts and other structures, and putting in place suitable Wills. For us, a number of our clients have been particularly motivated to crystallise their estate planning strategies ahead of this new Budget.

Much of this activity was originally prompted by the changes introduced last October but the uncertainty surrounding this latest statement made people feel that there was a need to take the plunge. For example, in relation to planning around securing Agricultural Property Relief (APR) or Business Property Relief (BPR) or looking to complete on property transactions ahead of concerns around Capital Gains Tax (CGT) and / or Stamp Duty Land Tax (SDLT) changes.

IHT Thresholds:

Inheritance Tax (IHT) nil-rate thresholds for both the ordinary nil-rate band (£325,000) and the residence nil-rate band (£175,000) have been frozen since 2009 (prior to which the band would increase in line with inflation) and were already due to be frozen until 2030. This has been extended by a year, to 2031. This is expected to capture an increase of 10% of taxable estates by 2029/30 compared to 2021/22, resulting in a projected additional tax revenue of £130m in 2031.

APR and BPR:

Last October, this unlimited, valuable relief was restricted to an allowance of £1m, per person. Such relief would be available at 100% against any eligible assets. Assets in excess of the new allowance will be able to benefit from relief at 50% (effective tax rate of 20%). Such relief is to be applied proportionally to all eligible assets. Such change is due to take effect from next April, 2026. These new restrictions caused a significant shake-up in the estate planning strategies for a wide range of family businesses and farmers. The Government has not rowed back on any of the key changes introduced last year but has made a concession in permitting any unused allowance to be transferred between spouses. This reduces the receipts that were otherwise forecast, by 14% by 2031. The changes have generated a lot of activity over the past year due to clients wishing to explore and understand their options. This is expected to continue ahead of next year when the changes become effective.

CGT – Employee Ownership Trust

Employee Ownership Trusts are aimed to promote employee ownership in businesses. They are being seen more and more and have enjoyed favourable tax treatment on their creation. Business owners can retain up to 49% ownership and the disposal to the EOT has, so far, been CGT (and IHT) free. Yesterday, the Government announced a reduction of this CGT relief from 100% to 50% resulting in a significant saving for the Government. This removes one of the main tax drivers for selling shares into an EOT but it continues to be a lot more efficient than other sales. This could deter some business owners from pursuing this option and it will remain to be seen what effect this change has.

Mansion Tax:

The High Value Council Tax Surcharge (HVCTS) also known as the Mansion Tax has prompted some interesting discussions. It will be introduced from April 2028 and be chargeable against residential properties worth over £2 million. It will be based on updated valuation using council tax bands and will start at £2,500 per year, increasing to up to £7,500 per year for properties over £5 million. It will be charged to property owners not occupiers and will be collected by local authorities and used to fund local government services. This forms part of the Government’s strategy to tax wealth and address disproportionate taxation of properties across the country. In the Budget document, the Government explains that the typical family home across England currently pays more per year in council tax than a £10m property in Mayfair. Questions have been raised over how this will work in practice. Don’t worry a consultation is planned next year!
It remains to be seen whether the exercise is worthwhile. The Budget tables project it will generate a yield of £435m in 20230/31.

IHT Treatment of Unused Pension Funds and Death Benefits:

A lot of issues were raised over the implementation of this change. How would it work in practice? With this Budget, the Government has provided some clarity around the administration of pension pots following changes announced last year and options that will be available to the PRs of an estate, which should provide some breathing space for PRs during the course of the administration of an estate as follows: PRs will be able to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay IHT due in certain circumstances. PRs will be discharged from a liability for payment of IHT on pensions discovered after they have received clearance from HMRC. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.

Taxation of income from different assets: 

Effective from April 2026: Basic rate of income tax on dividends will go up to 10.75%, and the higher rate will be 35.75%. Dividend rates are lower than the “standard” income tax rates, so there’s usually a benefit for a company owner/director in maximising their return through dividends rather than employment income. Those rates are now getting closer to each other, but dividends are lower – and there are also NICs benefits to dividends as compared to other income. From April 2027: savings income rates are also going up (22%, 42% and 47% for basic, higher, and additional rates respectively). From April 2027: the rates applying to property income are going up (to 22%, 42% and 47%). Not good news for landlords and could be bad news for tenants also if the cost is passed on by the landlords.

Excluded Property Trusts: 

IHT trust charges on excluded property trusts for pre-30 October 2024 will be capped to £5m. This will apply to trust charges from 6 April 2025. More detail is awaited on the implementation and calculation of the cap.

Infected Blood Scheme Compensation:

The Budget declared that: “…payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme [will be] relieved from inheritance tax in cases where the original infected or affected person eligible for compensation has died before the compensation is paid. First living recipients of compensation payments will also have two years in which to gift some or all of the compensation payment without an inheritance tax charge. This will be legislated for in Finance Bill 2025-26 and will apply to compensation payments made before or after 26 November 2025 and to gifts made on or after 4 December 2025.”

Jacqui Lazare advises private clients on UK-based tax and estate planning, estate administration and philanthropy.

Tom Chiffers advises private clients on UK-based tax and estate planning, estate administration and agricultural planning.

For more information or to contact the team about your personal circumstances following the Budget visit Wills, Trusts, Probate & Estates Solicitors – Clarke Willmott