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Beyond the headline measures affecting employers’ National Insurance, did it deliver and what are the key points for you in the latest budget update:
Changes to Inheritance Tax (IHT) & Pensions
From April 2027, your pension pot will no longer be protected from being taxed on your death. Previously, pensions generally fell outside of your estate for IHT purposes but as widely anticipated, both the unspent pot and any death benefits payable as part of the pension will be brought into the net.
Inheritance Tax: Agricultural Property and Business Property Reliefs
For the first time, the government is tackling Agricultural and Business property together, recognising perhaps the significant IHT lost on assets qualifying for these reliefs. Such assets will be lumped together from April 2026. Anything up to £1M will still be IHT-free, but after that 50% of the value will be taxed at the usual IHT rate of 40%.
Business Property Relief available on any non-listed shares (including any held on AIM listings or similar) will be restricted to 50%. Currently these are tax-free, making them an attractive investment when estate planning.
And assets qualifying for Agricultural Property Relief are to be expanded to include land managed under certain environmental management agreements.
Changes to Capital Gains Tax (CGT)
As expected there were significant changes to the rates to be applied on gains you make when you sell assets. The lower rates are increasing by a huge 8% to 18%, and the higher rates by 4% to 24%, which will now match the rates you might need to pay on selling residential property.
The limit at which Business Asset Disposal Relief and Investors’ Relief will apply will rise steadily, matching the main CGT rate from April 2026.
Increase in Stamp Duty Land Tax (SDLT)
The Government continues to target 2nd home owners with an increase of 2% in the rate of SDLT on additional properties and buy-to-lets. There is also a rise of 2% to the rate payable by companies buying residential properties costing more than £500,000.
Changes to non-dom status
So, the Government followed through on plans to scrap the current confusing and outdated “domicile” regime, replacing it from April 2025 with a residence-based system. This should make it much simpler to understand how those who travel are taxed. The “soft” introduction – allowing those affected a year to get used to the new rules – has been scrapped.
Those who opt-in to the regime will not pay UK tax on their foreign income and gains for the first 4 years that they are living in the UK.
The regime will extend to Inheritance Tax too from April 2025, which is designed to end the use of offshore trusts to shelter assets from IHT.
There are other changes too, including:
- Changing the way Capital Gains Tax on overseas assets is calculated, where you’ve previously made use of the remittance basis of tax,
- Limits to Overseas Workday Relief, and
- Extending the Temporary Repatriation Facility from 2 to 3 years, allowing you further opportunities to spend and invest foreign income and gains in the UK.
Changes to tax for businesses
Alongside changes affecting specific areas such as the energy sectors, the Government published a “Corporate Tax Roadmap”. This sets out various plans, but significantly commits to keeping the current Corporation Tax rates and thresholds, along with all key reliefs.
However, a package of reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts, coming into effect on Budget Day, might cause ripples of concern amongst business owners. They also announced the intention to reforms the current Transfer Pricing rules.
Tackling the tax gap
The Government announced a suite of measures designed to bring in tax that is owed to it already, including increasing the interest rate payable on unpaid tax and boosting HMRC staff and capability to crack-down on those who’ve got things wrong.
But there are also new rules, including:
- Tackling the use of umbrella companies to avoid the operation of PAYE,
- Changing how capital gains are taxed on members of Limited Liability Partnerships (LLPs) when the LLP liquidates,
- Strengthening the existing charity taxation rules and
- Targeting shareholders’ attempts to avoid tax by extracting company funds from close companies.
All of these will impact a significant proportion of the UK population and the rules will need to be carefully thought through to avoid the risks of non-compliance.
How will the government’s latest budget impact you?
Like the rest of the UK you’ll no doubt be concerned about how the Labour government’s latest budget announcements will impact you and your plans for the future.
DMH Stallard’s tax solicitors can do the hard work for you. To discuss your circumstances and to find out how our tax specialists can help you make the most of your money please contact Ingrid McCleave by email or call on 0207 822 1632.