The much speculated-on Autumn Budget has now been announced and whilst there were not as many significant changes in comparison to last year’s, there are still changes worthy of note.
IHT Thresholds
The thresholds for the Nil Rate Band (£325,000), Residence Nil Rate Band (£175,000) and Business Property Relief and Agricultural Relief (£1million) will all now be frozen an additional year until 2031. These follow on from the raft of changes to the Inheritance Tax regime that were announced in the 2024 Autumn Budget, you can read more about those here.
Business Property Relief (BPR) and Agricultural Relief (APR)
Perhaps one of the “noisiest” changes that the Chancellor made in the 2024 Autumn budget. Previously business assets or agricultural assets which met the criteria could apply for BPR/APR on 100% of the value of the assets. This did not have a cap. In Autumn 2024, the Chancellor announced that from April 2026 the 100% relief will be capped at the first £1million and any value above that will be charged for inheritance tax at 20%.
One of the oddities of this change was the fact that any unused allowance could not be transferred between spouses like the other allowances (Nil Rate Band and Residence Nil Rate Band). However, the Chancellor confirmed that from 6 April 2026 any unused BPR/APR allowance from the first spouse/civil partner’s estate will be available to be transferred to the surviving spouse/civil partner’s estate upon second death. This includes if the first death was before 6 April 2026.
Unused Pension Allowances
Another change from the Autumn 2024 budget was that any unused pension funds and linked death benefits were now going to be brought into an estate for Inheritance Tax purposes.
The Government consulted on how these changes would be administered and a large proportion of responses were concerned with how this would work in principle and the liability of the payment of inheritance tax being on the Personal Representatives of the estate and not the Trustees of the pension fund.
The Chancellor clarified today that the Personal Representatives will be able to direct pension scheme administrators to withhold 50% of taxable benefits up to 15 months and pay inheritance tax due in certain circumstances (the circumstances have not been set out as of yet.
Personal Representatives will be discharged from liability for payment of Inheritance Tax on pensions being discovered after they have received clearance from HMRC.
The Pension regime changes comes into effect from 6 April 2027.
Infected Blood Regime
Thanks to a campaign by STEP and Association of Lifetime Lawyers, amongst others, a change has been made to how the Infected Blood Regime is taxed for inheritance tax purposes.
The Chancellor confirmed that those who are due compensation from the Regime die before the payment is paid, then their estate will be relieved of paying inheritance tax on the compensation. This also follows to the beneficiaries of the recipients’ estate – the beneficiary will receive a “tax credit” so that their own estate is also not taxed.
Secondly, those who receive compensation will have up to 2 years to gift the compensation without an inheritance charge.
These changes will apply to compensations made before or after 26 November 2025 and to gifts made on or after 4th December 2025.
Employee Ownership Trusts
The Chancellor has announced that the Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts will reduce form 100% to 50% and will take effect from 26th November 2025.
Income Tax Rates changes
Income from property rents, dividends and savings will increase by 2 percentile points.
These will therefore be:
- Rent: Lower rate – 22%; Higher – 42%; Upper 47%
- Savings: Lower rate – 22%; Higher – 42%; Upper 47%
- Dividends: Lower: 10.75%; Upper: 37.5%
For property rents and savings the changes will take effect from 6 April 2027. However, for dividends the changes will take effect from 6 April 2026.
ISA Reform
From 6 Apil 2027 the annual ISA cash limit will be set to £12,000 within the overall annual ISA limit of £20,000. Savers over the age of 65 will continue to have a £20,000 cash ISA allowance.
HMRC Crackdown
The Chancellor announced that there will be new powers available to HMRC to close in on promoters of marketed tax avoidance. The Government will publish a consultation on how to tackle promoters in early 2026.
How Can We Help?
Our Wills & Probate team are here to help guide you through the impact of the Autumn Budget and what you can do to ensure your affairs are structured in the most tax-efficient way going forward. If you need advice, please contact us.
