As expected, the government has increased the capital gains tax (CGT) rates and maintained the freeze on personal tax thresholds (although it has not been extended). There have been significant changes announced in inheritance tax (IHT) which will see IHT extended to death benefits payable from a pension into a deceased’s estate, as well as changes to both business property relief and agricultural relief.
The government also announced the abolition of the non-domicile regime with effect from April 2025. The remittance basis of taxation for non-domiciled persons will be replaced with a residence-based regime.
Personal tax thresholds
The freeze on personal tax thresholds on income tax and national insurance will not be extended, meaning that from 2028/29 taxpayers can expect the thresholds to again increase in line with inflation. As the thresholds remain frozen, it means that the actual tax burden on workers is increasing because of the effect of inflation.
Capital gains tax rate increases
The lower rate of CGT is set to increase from 10 percent to 18 percent, with the higher rate increasing from 20 percent to 24 percent. These new rates will align with the residential property rates which remain unchanged.
CGT Business Asset Disposal Relief
In support of entrepreneurship, the government has announced an increase in Business Asset Disposal Relief (BADR) to 14 percent from 6 April 2025 and 18 percent from 6 April 2026. The lifetime limit for Business Asset Disposal Relief (BADR) will remain at £1 million.
Inheritance tax changes
The freeze on the IHT thresholds will be extended for a further two years until April 2030. According to the government this means that 90 percent of estates each year will not pay inheritance tax.
In a significant move, the government will introduce legislation charging IHT on unused pension funds and death benefits payable from a pension into a person’s estate. This change will apply from April 2027.
Agricultural property relief and business property relief
The government has announced significant reforms of both agricultural property relief and business property relief. From April 2026, the first £1 million of combined agricultural and business assets will be entitled to 100 percent relief from IHT. The change will see the rate of relief reduced to 50 percent for amounts in excess of £1 million.
Non-domicile residents
The concept of non-domicile residents will be abolished from April 2025. The remittance basis of taxation for non-domiciled individuals is to be replaced with a residence-based regime.
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