Carl Naudo, one of the advisers from our Financial planning team gives us an update on thoughts around the budget…
After many months of speculation about what the chancellor may change, it has now been two weeks since she gave her much-anticipated Budget.
Having had the chance to let the dust settle and reflect on the changes, we now have a better view on how they will affect you, and the different strategies that may now be employed dependent on circumstances.
While I won’t go through every change, I will update you on some of the most significant announcements the chancellor made on 30 October that could affect many of our clients.
Capital Gains Tax rises
There were lots of rumours pre-budget about bringing Capital Gains Tax (CGT) in line with Income Tax levels, but that didn’t happen.
Instead, the lower rate of CGT has risen from 10% to 18%, and the higher rate from 20% to 24%.
While not in line with Income Tax levels, this will certainly make people more mindful of any capital gains they make in future that are above the unchanged annual CGT exemption of £3,000 for individuals and £1,500 for trusts.
Ensuring you use your CGT exemption every year, reporting previous losses, and considering spousal transfers will now be even more important since the tax burden is higher.
Second home Stamp Duty Land Tax
Many people in the UK see property as the perfect investment solution, and looking at the historical gains in property, we can all see why. However, successive governments continue to make moves to discourage this, or, at least, have a slice of the pie.
It is easy for the government to collect this tax, and they will increase additional property Stamp Duty Land Tax (SDLT) from 3% to 5% above the standard residential rates, further affecting the investor’s return.
Inheritance Tax threshold freeze
The Inheritance Tax (IHT) thresholds were due to rise with inflation from April 2028, but the chancellor has extended this freeze until 2030. As a reminder, the thresholds are as follows:
- The nil-rate band (NRB) is £325,000.
- The residence nil-rate band (RNRB) is £175,000.
This is important to bear in mind when dealing with your estate planning, as the freeze might mean many more estates could have an IHT liability.
Inheritance Tax on pensions
During the budget, the chancellor announced that she plans to bring pensions into estate valuations from 6 April 2027 (subject to a short consultation period).
For many years, pensions have sat outside of people’s estates, sheltered from IHT. But, this change will mean considerably more people could be brought into the IHT bracket.
As a result of these changes, there will need to be more consideration given towards estate planning and potentially choosing to take income from the pension sooner rather than later.
Business and Agricultural Property Relief
We also saw changes to Business and Agricultural Property Relief, which take effect from 6 April 2026.
IHT Relief of up to 100% continues on Business and Agricultural Property up to £1 million to protect family farms and businesses. It will be reduced to 50% thereafter.
The government will also reduce the rate of Business Property Relief available from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as the AIM.
In conclusion
Looking back at the pre-Budget speculation in the media, it might be tempting to say, “Well, that wasn’t too bad”. However, this Budget will undoubtedly affect many clients’ financial plans.
Ultimately, our message is: don’t panic, we have time to consider these changes for you personally and reinforce the importance of early financial planning.
A helpful way to mitigate many of these changes is to start planning as soon as possible, consistently applying small but effective strategies over time, such as making full use of your IHT and CGT exemptions.
By doing so, you’ll be better positioned to navigate these evolving financial landscapes.
To find out how our expert team could assist you with understanding some of the changes introduced in the Budget, please email office@butlertoll.co.uk or call 01793 786 300.
We look forward to working with you on creating your future plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
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