With the Autumn Budget set for 26 November, attention is turning to how Chancellor Rachel Reeves will balance the need for fiscal discipline with the government’s growth ambitions. The UK faces a widening fiscal gap, and expectations are building that this Budget could mark a turning point in tax policy. While the final measures remain under wraps, several recurring themes are emerging, many with direct implications for business owners and higher earners.
Pensions
Last year’s Autumn Budget introduced significant pension reforms, including making pensions liable to inheritance tax from April 2027. This year, further changes may be on the table. The Chancellor may adjust the level of tax relief available to higher and additional rate taxpayers, which could reshape retirement planning for business owners and higher earners. There is also speculation around restrictions to the 25% tax-free lump sum, currently capped at £268,275, and changing the current salary sacrifice rules.
Inheritance Tax
Inheritance tax is another area under scrutiny. Under current rules, lifetime gifts made to individuals, known as Potentially Exempt Transfers (PETs), fall outside your estate for inheritance tax if you survive at least seven years after making the gift. Gifts made between three and seven years before death may be taxed on a tapered scale depending on the value of the gift and the available nil rate band. The government may extend this seven-year period, for example to ten years, or limit the total value that can be gifted tax-free in a lifetime. The basic nil-rate band has been £325,000 since 2009 and is set to stay at this level until at least April 2028. There is speculation that this current freeze will be extended. With asset values rising, more estates will gradually become subject to inheritance tax. If the gifting window is extended, earlier planning may be needed to ensure gifts are tax efficient.
Capital Gains Tax
Capital gains tax on the sale of an only or main residence is also attracting attention. At present, most individuals benefit from full Private Residence Relief, exempting gains on their home from CGT. Currently, there is also a CGT tax-free uplift on death. The government may introduce a threshold above which Private Residence Relief will be restricted/not available. CGT rates may also be aligned with income tax rates, and/or the CGT tax-free uplift on death could be abolished. For example, Private Residence Relief may be restricted for properties valued at £1.5m or more, and there will be more CGT to pay on the sale of assets you inherit.
Income Tax Thresholds
Raising income tax rates directly would be politically difficult, but the government can achieve a similar outcome by freezing thresholds. These freezes, already set until 2028, may be extended, meaning more people are drawn into higher bands as earnings rise. This is a phenomenon known as “fiscal drag,” where inflation and income growth push taxpayers into higher tax brackets due to frozen thresholds.
Property-related Taxes
Property remains a likely target for adjustments. Potential changes include a “mansion tax” on high-value homes, reforming or replacing Stamp Duty Land Tax, and possibly switching Stamp Duty Land Tax liabilities from buyer to seller. Landlords may also face new costs if National Insurance is applied to rental profits, reducing net yields. Companies holding residential property could see higher charges under the Annual Tax on Enveloped Dwellings. The overall trend points towards wealth tied up in property making a bigger contribution to public finances.
ISA and Savings
ISAs have long been a cornerstone of UK savings, but their allowances may not remain untouched. Reducing or restructuring the annual limit, particularly for cash ISAs, is being widely speculated. The government may also look to encourage investment in UK businesses by linking part of the allowance to growth-focused funds or infrastructure projects.
How HB&O can help you
Now is the best time to review your financial position and ensure your plans remain responsive and ready to adapt. Our tax specialists can help you navigate upcoming changes with clarity, so you can make informed decisions that work for you. If you would like to discuss how these potential adjustments could affect you, please do not hesitate to get in touch.
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