How will Chancellor’s Budget changes affect you?
The Autumn Budget was announced on 30 October and there is still much to be uncovered as the dust settles. In the build-up to the announcement, a significant amount of speculation surrounded how the chancellor planned to raise £40 billion in taxes and who met the criteria of “a working person”. However, it is clear that farmers, business owners and employers will be amongst those most impacted. If you fall into one of these three categories, here’s what you need to know:
Inheritance Tax
From 6 April 2027, the value of unused pensions and death benefits (such as funds held in SIPPs) will be included in an individual’s estate for IHT purposes. Previously, these assets were not normally considered. An IHT exemption will apply where these assets pass to a surviving spouse or civil partner but there could still be an IHT charge when the second of them dies.
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From April 2026, business owners and farmers will only receive full IHT relief on the first £1 million of assets that qualify for Agricultural Property Relief and Business Property Relief at 100%. This is a fundamental change from the previous policy, which had no limit on the amount of relief that could be claimed. From April 2026, the excess above £1 million will be taxed to IHT at 20%. This IHT liability can be paid in instalments over 10 years after the owner’s death. Even so, this could cause a financial strain for beneficiaries inheriting the business and could result in the sale/breakup of a family farm or business. These changes may lead to discussions about lifetime gifts which have their own IHT implications, and appropriate business structures.
Certain investments such as a number on the Alternative Investment Market which currently receive full IHT relief will qualify for only 50% relief from 6 April 2026. A change here was anticipated and was not as severe as some feared but might have a longer-term impact upon these investments.
Capital Gains Tax
The CGT rates applying to residential property, such as when an individual sells a buy to let property, remain the same.
CGT rates on other assets have increased from 10% to 18% (basic rate) and 20% to 24% (higher rate).
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Hide AdBusiness Asset Disposal Relief, a relief from CGT which can apply when an individual sells their business, will see its tax rate for gains up to £1m increase from 6 April 2025 from 10% to 14% and then 18% from 6 April 2026.
Employers
The National Living Wage (for employees aged 21 and over) will rise from £11.44 to £12.21 per hour in April 2025. The other age-specific bands for those under 21 will also rise.
Employer NI contributions will increase to 15% from April 2025, together with a substantial decrease in the threshold above which these are payable, from £9,100 down to £5,000. To reduce the impact on smaller businesses, the Employment Allowance will increase from £5,000 to £10,500.
There are no changes to the income tax thresholds, rates or NI contributions for employees.
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Hide AdIt was widely predicted the Autumn Budget would result in significant tax changes and that is one prediction which proved to be true. As seen from the recent protests at Westminster, the repercussions will be significant. It will be important for individuals to ensure they are making full use of the tax exemptions and allowances available and to consider the implications for their estate/business.
David Mowlem is a Partner, Gillespie Macandrew