With the recent Autumn Budget announcements, there’s plenty to unpack, especially for those managing pensions, planning for inheritance tax (IHT), or working with agricultural property relief (APR) and business property relief (BPR).
In this article we have summarised all the big tax changes and broken them down into manageable bites, focusing on what they mean for you.
Changes to Pensions and IHT: What’s New?
For some time now pensions have played a significant role in inheritance tax planning as a tax-efficient way to pass wealth to beneficiaries.
Historically, if you died before the age of 75, unused pension funds could often be transferred to beneficiaries free from both income tax and IHT.
However, from April 2027, this will change…
What’s happening?
- Unused pension funds will now be included in the holder’s estate for IHT purposes.
- This applies all schemes which are considered transferable on death – whether they be defined contribution schemes, defined benefit schemes, or death benefits, although the specifics remain unclear until draft legislation is published.
Why does it matter?
Inheritance tax planning will now require more careful consideration of how pensions fit into your overall wealth strategy, There will be a number of impacts – for example some estates will be brought into Inheritance tax when they would have been outside it previously, while if the value of your pension fund brings the total value of your estate to in excess of £2 million, your eligibility for the residence nil rate band (RNRB) could be affected.
Looking on the bright side, given all the noise prior to the budget concerning other potential measures to limit or reduce key pension tax reliefs, such as higher-rate relief on contributions, annual and lifetime allowance limits, employer national insurance contributions (ER NICs) and the tax-free lump sum, many people breathed a long sigh of relief that this was the only pension tax change introduced!
However, the inclusion of pensions in IHT estates will complicate matters for executors and pension fund administrators, so professional advice is essential.
Business Property Relief (BPR) and Agricultural Property Relief (APR)
For years, BPR and APR have been cornerstones of inheritance tax planning, offering significant reliefs for qualifying business and agricultural assets.
But with claims totalling £4.42 billion in 2021-22, it’s no surprise the government has taken a closer look.
The key changes to BPR and APR:
- A £1 million cap on 100% relief will apply to APR and BPR from April 2026.
- Assets exceeding this limit will qualify for 50% relief, creating a tiered system.
- Should you qualify for BOTH BPR and APR, please be aware that the £1m ‘allowance’ is shared proportionately between both assets.
- The allowance is also not currently expected to be transferable between spouses and civil partners, meaning that a married couple may end up with only one “slice” of £1 million between them without prior planning.
- Alternative Investment Market (AIM) shares, historically a common tool for BPR planning, will no longer qualify for 100% relief, dropping to 50% tax relief.
- Trusts with qualifying assets will also have a £1 million allowance for BPR and APR assets – this will be divided between all trusts which are created after Budget day.
- Trusts which historically have not had to concern themselves with ongoing IHT charges because they only held property with 100% relief may now find they have an IHT bill every ten years or when assets leave the trust.
What do the changes to BPR mean for you?
High-value estates that rely heavily on APR or BPR may now face a tax bill, meaning that many whose estates are asset rich and cash poor may have to sell off assets to fund an IHT bill.
The one consolation is that it looks like the estate will be able to pay the IHT by instalments over a maximum of ten years.
If your estate includes agricultural or business assets, you should review your plans now to mitigate future tax liabilities, but be aware of anti forestalling legislation, meaning that should a donor gift or transfer assets now and subsequently die on or after 6 April 2026, then today’s new rules will apply to any gifts which took place within seven years of the date of death.
Capital Gains Tax (CGT) Adjustments
There has also been some tinkering with CGT rates, which is important for business owners and investors.
Here’s what’s changed in relation to CGT:
- The basic rate of CGT rose with immediate effect from 10% to 18%, and the higher rate from 20% to 24% for most assets, aligning with the rates for capital gains on residential property sales.
- The rate for business asset disposal relief remains at 10% for the remainder of this fiscal year and will increase to 14% in April 2025 and 18% in April 2026, aligning more closely with standard CGT rates.
- The annual exemption remains at £3,000 for 2025-26 for most individuals.
If you’re planning to sell a business or other qualifying assets, it’s worth considering timing to take advantage of the current rates, but again, beware anti-forestalling legislation does exist!
Other Noteworthy Changes
SDLT (Stamp Duty Land Tax):
- From 31 October 2024, additional residential property purchases will attract an SDLT surcharge of 5%, up from 3%.
- The standard SDLT nil-rate band reverts to £125,000 from April 2025.
Employer’s National Insurance Contributions (NICs):
- From April 2025, the employer NIC rate rises from 8% to 15%.
- The employment allowance (EA) increases to £10,500, offering some relief for smaller employers, and EA restriction is removed meaning that it is available for all employers to claim.
- However, the secondary threshold above which employer NICs are to be paid reduces from the current £9,100 to £5,000 until 5 April 2028.
Mandatory Registration for Tax Advisers:
- From April 2026, tax advisers must register with HMRC, undergo anti-money laundering checks, and ensure their own tax affairs are up to date. This is part of efforts to raise standards across the tax advice sector.
What Should You Do Now?
With so many changes on the horizon, planning ahead is key. Whether you’re concerned about the impact of pensions in your IHT estate, changes to APR and BPR, or rising CGT rates, professional advice is critical.
👉 Next steps:
- Review your IHT and CGT exposure with a tax and/or financial adviser.
- Revisit your pension strategy in light of the new rules.
- If you own a business or agricultural property, consider how the APR/BPR cap might affect your estate.
Final Thoughts
These changes are part of a broader government effort to reform capital taxes, and we’re likely to see further adjustments in the years to come. For now, the message is clear: don’t delay planning, and seek expert guidance to navigate the complexities ahead. There may, for example, be a window of opportunity to make gifts of APR or BPR assets into trust before the new rules come into play from April 2026.
For more information on your individual position, please contact the IN Accountancy Tax Team who will be happy to help.
