The Autumn Budget this week provided the first real opportunity to see how Andy Burnham’s government is going to tackle the difficult balancing act of raising revenue, supporting growth and maintaining general confidence.
As expected, Chancellor John Healey’s first Budget was relatively restrained and subdued with few major changes and tax rises included.
Here’s the key changes in relation to Private Client matters and what they could mean for you and your future.
Changes to rates of Income Tax
The rates on income derived from property and savings are to increase by a further 2% (this is in addition to the 2% increase announced in the 2025 Autumn Budget, meaning a total 4% increase when compared with current rates).
The new rates will come into effect from 6 April 2027 onwards and, once they are in force, will be as follows:
- Basic Rate 24%
- Higher Rate 44%
- Additional Rate 49%
The new rates on savings income will apply to UK resident individuals, including taxpayers in England, Wales, Scotland and Northern Ireland.
The new rates on property income will apply to taxpayers in all UK countries with the exception of Scotland where tax residents are subject to separate income tax rules on property income.
These increases are obviously a blow for both private landlords and savers – 4% is a significant increase.
A 2% increase to the rates in force for dividend income was announced in the Autumn 2025 Budget and that increase remains unchanged. This increase came into force from April 2026 (making the basic rate 10.75% and the higher rate 35.75%).
Capital Gains Tax (CGT)
After significant pre-budget speculation, there has been no increase in the main CGT rates. This offers some very welcome relief and stability to those concerned about how their wealth will be taxed.
There is to be a cut to Business Asset Disposal Relief (BADR) with the lifetime limit being reduced to £500,000 from £1million. This is a step towards BADR moving into irrelevance as the maximum benefit of qualification at the new £500,000 threshold is just £30,000.
This change will result in higher tax bills for entrepreneurs looking to sell their businesses and may result in disposals being pushed through before 6 April 2027, after which BADR will cease to really be a material consideration on disposals.
There is, however, a new CGT relief being introduced with effect from 6 April 2027. This is similar to the original, and generous, Entrepreneurs Relief with a lifetime allowance of £10million below which gains are taxed at a rate of 10%.
This will undoubtedly soften the blow for some entrepreneurs, but much will depend on who qualifies as the conditions for this relief are more stringent, and will be difficult for many to meet.
Inheritance Tax (IHT)
IHT was largely left untouched in the Budget with there being no change to the seven-year window for lifetime giving, the gifting exemptions or taper relief. There is to be no reform or abolition of the IHT Residential Nil Rate Band.
A few things we already knew were confirmed, namely:
- The IHT Threshold will remain frozen until the 2030/2031 tax year
- 100% IHT Agricultural Property Relief/Business Property Relief capped at £2.5million from April this year (threshold is transferable between spouses).
- Most Unused Pension Funds and Death Benefits are to be brought into the IHT net from April 2027. Where a death occurs after 75 years of age, this will mean both IHT and income tax could apply to unused pension funds. This remains a significant planning topic for those that expect to have excess pension funds on death.
In the context of most unused Pension Funds and Death Benefits coming within the IHT net from April 2027, a helpful refinement has been announced for deceased estates making charitable gifts.
Personal Representatives will be able to choose whether pension assets form part of an estate’s general component, or are treated as a separate component, when calculating the entitlement to the reduced 36% rate of IHT which is applicable where at least 10% of the estate is given to charity.
This is welcome flexibility which should help to prevent unintended inclusion of pension wealth within existing charitable arrangements that were put into place before the changes to IHT treatment of pensions.
On IHT and pensions, change was announced that addresses a practical issue for families and parties dealing with the administration of a deceased person’s estate. A prospective Personal Representative will be able to direct a Pension Scheme Administrator to pay IHT directly to HMRC (when certain conditions are met).
ISAs
The Chancellor announced the reductions to the ISA allowance (announced in the 2025 Autumn Budget) have been scrapped.
The ISA allowance will remain at £20,000 and not be reduced to £12,000, as had previously been planned.
Residential Property
There is to be no overhaul of Stamp Duty Land Tax and Council Tax.
It was confirmed that the Government is pressing ahead with plans for a Mansion Tax to start at a threshold of £2million (tax bills are due to start landing from March 2028).
For any further information and advice, please contact the Private Client team at Wake Smith on 0114 266 6660.