Impact on Individuals

Income Tax and National Insurance thresholds

As promised in Labour’s manifesto, there were no increases to Income Tax or National Insurance Contributions for workers. The Chancellor has also confirmed that the current thresholds for Income Tax and National Insurance will be increased in line with inflation from 2028/29.

CGT rates are to rise as expected

The lower rate of CGT for individuals disposing of assets from today will increase from 10% to 18% with the higher rate to increase from 20% to 24%. The rate of CGT payable by trustees will also increase to 24%. Residential property gains will continue to be taxed at 18% and 24%.

The lifetime limit for Business Asset Disposal Relief (BADR) will remain at £1m although the applicable rates are set to change. The lifetime limit for Investor’s Relief has reduced from £10m to £1m with effect from today. Eligible gains will continue to be taxed at 10% for 2024/25, with the rate increasing to 14% from 2025/26 and 18% from 2026/27.

The value of BADR has been systematically reduced by successive budgets, but for those already contemplating disposing of their business, it may be worth accelerating plans for execution prior to April 2025. Anti-forestalling rules have been introduced to prevent taxpayers from using certain contracts to circumvent the increased rates.

As anticipated, the rates of capital gains tax that apply to carried interest will increase from 18% and 28% to 32%. This applies to individuals who provide investment management services to investment funds and receive sums of carried interest which are taxed as capital gains and will have effect from April 2025.

Inheritance Tax (IHT)

Restrictions on IHT relief for business and agricultural assets

From 6 April 2026, there will be a major reform of Business Property Relief (BPR) and Agricultural Property Relief (APR) which reduces the current rate of relief from 100% to 50%. The Government will publish a technical consultation in early 2025.

It has been announced that a new £1 million allowance will apply to the combined value of property qualifying for 100% BPR and 100% APR. Where the total value of qualifying property is more than £1 million, the allowance will be applied proportionately across the total with the value in excess of £1 million attracting relief at the reduced 50% rate.

The allowance covers :

• property in the estate at death;
• lifetime transfers to individuals in the 7 years before death (“failed potentially exempt transfers”); and
• chargeable lifetime transfers where there is an immediate lifetime charge, so for example when property is transferred into trust.

Assets that currently only qualify for 50% relief will not use up the allowance and any unused allowance will not be transferable between spouses and civil partners.

According to details released today, the new rules will apply for lifetime transfers made on or after today’s date, if the donor dies on or after 6 April 2026. This prevents forestalling.

For example, a lifetime gift of unquoted shares of £2 million made on or after 30 October 2024 will be a failed potentially exempt transfer if the donor dies within 7 years. 100% relief would apply to the first £1 million and 50% to the next £1 million under the new rules if the recipient owned the shares until the donor’s death and the donor’s death is on or after 6 April 2026.

The £1 million allowance will also apply to the 10-year charges and exit charges which apply to relevant property trusts. Whereas current rules gave these trusts 100% relief against these charges, they will now also only have the £1 million allowance. The government will publish a technical consultation in early 2025 on the detailed application of the policy to charges on property within trust.

Settlors may have set up more than one trust comprising qualifying business property and/or agricultural property before 30 October 2024, in which case from 6 April 2026, each trust would have a £1 million allowance for 100% relief. The government intends to introduce rules to ensure that the allowance is divided between these trusts where a settlor sets up multiple trusts on or after 30 October 2024.

The government will publish a technical consultation in early 2025 on the detailed application of the policy to charges on property within trust.

We recommend the review of current succession planning and review of wills in light of these changes to BPR and APR and the impact of funding the potential IHT charges. Even though the IHT liability relating to business assets can often be paid by instalment over 10 years, the potential additional liability could put severe strain on business successors.

IHT on pensions

From 6 April 2027, most unused pension funds and death benefits will be included within the value of a person’s estate for Inheritance Tax purposes. Currently, most unused pension funds do not form part of an individual’s estate for Inheritance Tax purposes, meaning that members can pass these funds to beneficiaries after their death without any Inheritance Tax charge.

A consultation was launched today to seek views on the processes required to implement these changes as pension scheme administrators will become liable for reporting and paying any IHT due on unused pension funds and death benefits.

From 6 April 2027, when a pension scheme member dies with unused funds or without having accessed all of their pension entitlements, those unused funds and death benefits will be treated as being part of that person’s estate and may be liable to Inheritance Tax. There will be no distinction between discretionary and non-discretionary schemes.

A small number of specified pension benefits will remain outside scope for Inheritance Tax, including where funds can only be used to provide a dependants’ scheme pension. These are currently out of scope in non-discretionary schemes and so will remain out of scope under this change.

To report and pay the IHT due on pension elements of a scheme member’s estate, pension scheme administrators will require details of how much of the deceased’s IHT nil-rate band is to be apportioned to their unused pension funds and death benefits.

Pension scheme administrators will be required to provide the value of any pension elements within the deceased’s estate within 2 months of receiving a request from the personal representative.

IHT thresholds

The Chancellor confirmed that the current IHT thresholds will be frozen until 2030.

Non-dom regime to be abolished

As previously confirmed, the current remittance basis regime for non-domiciled individuals is abolished from April 2025 along with the concept of ‘domicile’. A new residence based regime will take effect from 6 April 2025.

Individuals who opt in to the new regime won’t pay UK tax on foreign income and gains arising within the first four years of UK tax residence (following 10 consecutive years of non-residence) while former remittance basis users will be able to rebase their foreign assets to their value at 5 April 2017 for CGT purposes provided certain conditions are met.

The Temporary Repatriation Facility announced by the previous government, will be extended to 3 years from 6 April 2025. Individuals will be able to bring their unremitted foreign income and gains into the UK and these will be taxed at a rate of 12% during the first two years and 15% during the third year.

A new residence based system will come into effect from 6 April 2025 for IHT, bringing non-UK assets within the scope of IHT where an individual has been UK resident for 10 years out of the last 20 and they will remain in scope for a period of time after leaving the UK.

Stamp Duty Land Tax (SDLT)

As suspected, the Labour Government has not frozen SDLT on residential property at current discounted rates and the proposed increase in the SDLT threshold for homebuyers – the levels at which buyers start to pay SDLT (currently £250,000) - will decreased, as planned, from March 2025 to £125,000.

The higher rates of SDLT, payable on the purchase of second homes, will increase from 3% to 5% above the standard residential rates of SDLT, effective from 31 October 2024. This measure is expected to disincentivise the acquisition of second homes and buy-to-let properties, freeing up housing stock for main home and first-time buyers.

Alcohol Duty

The Alcohol Duty rates on qualifying draught products will reduce by 1.7% in cash terms with effect from 1 February 2025. This should reduce the duty by 1 pence for an average alcoholic strength pint (4.58% alcohol by volume).

With effect from 1 February 2025, the Alcohol Duty rates for all categories of non-draught products will increase by Retail Price Index inflation.

The cash discount provided to small producers for non-draught products will increase and the cash discount provided to small producers for draught products will be maintained with effect from the same date, increasing the relative value of Small Producer Relief.

Tobacco Duty

The Tobacco Duty escalator of RPI +2% will be renewed for the duration of the current Parliament increasing the duty on all tobacco products. Duty on hand rolling tobacco will be increased by an additional 10% this year.

With effect from 1 October 2026, a flat rate Vaping Products Duty of £2.20 per 10ml vaping liquid will be introduced together with an equivalent further one-off increase in Tobacco Duty.