After much speculation and anticipation, the 2025 Autumn Budget has been delivered by Rachel Reeves. The announcement covered a wide range of new measures. In the context of estate planning it built on the Autumn 2024 Budget rather than introducing drastic new changes. Some of the key points to note in this area are as follows:
Inheritance Tax
- The £1 million allowance for 100% Agricultural Property Relief and Business Property Relief is to be transferrable between spouses and civil partners from April 2026. This is a welcome concession and removes some complexity for married couples seeking to maximise the available allowances.
- Inheritance tax thresholds will remain frozen for a further year to April 2031.
- Payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Payment Scheme will be relived from inheritance tax where the recipient dies before receiving payment. Living recipients may also gift the payment within 2 years without the usual 7 year rule applying (applicable for gifts after 4 December 2025).
- With unused pension pots falling into the IHT net from 6 April 2027, personal representatives will be granted the power to direct pension scheme administrators to withhold up to 50% of taxable pension benefits for up to 15 months. While this provides comfort to PRs, for more complex estates the final IHT position may still be unknown 15 months after a death.
- Personal representatives will be released from liability for IHT on pension funds discovered after HMRC has issued formal clearance.
- A new cap of £5million will be introduced on relevant property trust charges for excluded property trusts. This will apply to trust charges from 6 April 2026 but only trusts with significant value will be affected.
- Anti avoidance measures will be introduced to:
- Ensure UK agricultural property held via non UK entities is treated as UK-situs.
- Bring certain trust asset changes within the IHT net before an exit charge.
- Restrict charity exemptions to direct gifts to UK charities and clubs.
Income Tax and Capital Gains Tax
- Personal tax thresholds and National Insurance contributions will remain frozen until 2031.
- 2% increase on the basic and higher rates of tax on dividends from April 2026. 2% increase on savings and property income rates from April 2027 for basic, higher and additional rate taxpayers.
- Reduced CGT relief on disposals to employee ownership trusts from 100% to 50%.
Pensions
- Salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance from April 2029.
What now?
With the Autumn Budget behind us, individuals can now assess and refine their estate planning strategies. The landscape of IHT planning is changing with a significantly higher proportion of the population due to be affected. If you would like to speak to someone about navigating these changes, please get in touch with a member of our Private Client team.
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