The Chancellor’s Budget centred on economic stability and long-term growth, with a continued focus on reducing borrowing and maintaining fiscal discipline. The overall picture remains broadly similar to 2024 particularly in areas such as pensions, Inheritance Tax (IHT), and agricultural and business reliefs.
However, several changes will have practical implications for individuals, families, and business owners planning for the future. Early planning and tailored advice can help you navigate these updates effectively, and our team of expert solicitors are here to support you every step of the way.
General Budget Overview
This year’s Budget did not introduce increases in the basic rate of Income Tax, VAT, or National Insurance. However, with thresholds frozen once again, many people will continue to feel the effects of fiscal drag, paying more tax despite no rate rises. The budget did increase taxes on property, savings and dividend income to help narrow the gap between tax paid on work and tax paid on income from assets.
Key announcements included:
- No rises in major taxes, but continued frozen thresholds will draw more taxpayers into higher bands.
- Introduction of new property-related taxes, including a mansion tax for high-value homes.
- Capital Gains Tax relief tightened on disposals to Employee Ownership Trusts from 100% to 50% affecting succession planning for business owners.
Our team regularly advises on property structuring, business exits, and wealth protection, and can help you assess the impact on your long-term plans.
Key Updates in Inheritance Tax (IHT)
- The basic tax-free threshold (£325,000) and the extra threshold for main residences (£175,000) remain frozen until April 2030.
- Lifetime gifting rules were thought to be under review, with speculation about extending the seven-year rule to ten years, but no changes were announced.
- From April 2027, unused pension pots will be included in Estates for IHT purposes.
These changes highlight the value of reviewing Wills, trusts, and lifetime gifting strategies. Our experienced private client solicitors can help ensure your plans remain tax efficient and aligned with your family’s needs.
Agricultural & Business Property Relief (APR & BPR)
The autumn budget brings significant reforms, set to take effect in April 2026, which will impact farmers, landowners, and business owners. The Budget introduced an important update for agricultural and business families: the new £1 million relief allowance can now move freely between spouses. This added flexibility will be welcome, but it won’t eliminate exposure to inheritance tax, especially for those with substantial farming or business assets. For many, proactive and personalised planning will still be crucial to manage potential liabilities.
Key takeaways:
- A £1 million combined allowance for Agricultural Relief and Business Relief.
- Value above £1 million receives 50% relief (effective 20% IHT).
- The allowance is refreshed every 7 years for gifts and 10 years for Trusts.
- Shares in AIM companies will only receive 50% relief and they do not benefit from the £1m allowance.
- Change from 2024 announcement: The £1 million allowance can now be transferred between spouses, allowing up to £2 million combined on second death. This removes the need to have a specific legacy of the allowance on a first death.
These changes will significantly affect succession planning for family businesses and agricultural holdings. Our Rural and Business teams can assist you in reviewing structures, ownership, and relief eligibility ahead of the 2026 implementation.
Gifts to Charities
From the date of the Budget:
- Only gifts to UK charities and Community Amateur Sports Clubs (CASCs) qualify for IHT exemption.
- Trusts set up for charitable purposes, but which are non-registered charities will no longer qualify. Trustees should review the impact.
Our team of expert solicitors can advise trustees and charities on compliance, governance, and restructuring where needed.
Unused Pension Funds and Death Benefits
From April 2027:
- Pension funds will fall within the IHT regime based on the value remaining at death.
- Executors can ask scheme administrators to withhold 50% of the fund for up to 15 months post death and pay IHT directly to HMRC.
- Relief applies if pensions are discovered after HMRC confirms IHT is fully paid. HMRC needs to be “satisfied that they [personal representatives] have made every effort to locate the deceased’s pensions”
This reinforces the importance of up-to-date estate information and clear documentation. Our Private Client team can assist with estate administration and planning for these changes.
ISA Changes
In a bid to encourage more savers to invest in stocks and shares ISAs, the Chancellor also outlined reforms to ISA rules, due to take effect in April 2026. Under the new system, individuals aged under 65 will be limited to placing £12,000 of their £20,000 ISA allowance into cash, with the balance required to go into investments. Those aged 65 and over will continue to benefit from the full cash allowance.
From April 2027:
- The overall ISA allowance remains £20,000.
- For those under 65, Cash ISAs will be capped at £12,000 with at least £8,000 required to be invested in stocks and shares.
- Individuals over 65 retain the full £20,000 cash allowance.
The latest Budget reinforces the importance of proactive tax, estate, and business planning, especially with further changes expected over the coming years. Whether you are reviewing your Will, preparing for succession, restructuring a business, or managing agricultural or rural assets, our team of expert solicitors can guide you through every step.
If you would like tailored advice on how these updates may affect you, your family, or your business, please contact our Private Client solicitors today. We’ve been guiding generations since 1754, and we’re here to help you plan with confidence too.