Caroline Miller
- Partner
- Private Client
Budget 2025: an end to the speculation
Today’s Budget delivers long-awaited certainty on measures affecting high-value property and personal tax planning.
While perhaps not as bad as was feared, the announcements confirmed today, from the “high value council tax surcharge” to income tax rate hikes for property, dividend and savings income, will shape decisions for families, trustees, and investors over the coming years.
Head of the private client team, Caroline Miller, comments on the impact on high net-worth individuals as follows.
“After weeks of speculation, it is some relief that many of the rumours have not materialised: further restrictions to inheritance tax (IHT) reliefs, removing the capital gains tax free uplift on death and introducing an exit tax on unrealised gains of individuals leaving the UK, were all feared. Many of our clients may breathe a sigh of relief that the Chancellor kept her focus to very few measures that have direct and significant impact. Whilst perhaps only a minor concession in the wider context, it was announced that the £1 million IHT allowance for agricultural and business property between spouses and civil partners will be transferable between them. These IHT reforms are due to come into force from 6 April 2026, so this is a welcome announcement for business owners and farmers who own their assets jointly with their spouses or civil partners, removing unnecessary legal complications and aligning it with other IHT allowances.”
Partner in the residential property team, Emma Sear, commented on the impact of the Budget on property owners and landlords as follows.
“Today’s Budget announcements included increased property income tax rates and the introduction of a new “high value council tax surcharge”. From 6 April 2028, both homeowners and landlords owning rental properties valued at £2 million or more will shoulder the high value council tax surcharge, starting at £2,500 per year and rising to £7,500 for properties worth over £5 million. Landlords need to be aware that they will face a double whammy as from 6 April 2027, property income will be subject to its own property income tax band with a basic rate of 22%, a higher rate of 42% and a property additional rate of 47%. Finance cost relief will only be available at the basic rate. Faced with further erosion of rental income, many landlords may reassess their portfolios. If this triggers a reduction in supply, tenants will inevitably see rents rise again.”
Other measures to note from the Budget speech affecting private clients include the following.
- Dividend income rates – the income tax ordinary and upper rates on dividend income will be increased by 2% from April 2026. The ordinary rate will be increased to 10.75% and the upper rate will be 35.75%. Importantly, and perhaps surprisingly, the additional rate (payable by taxpayers in receipt of income over £125,140) will remain unchanged at 39.35%. This appears to be a concession to high net-worth business owners and investors. These changes will take effect from 6 April 2026.
- Savings income – the income tax rate on savings income will be increased by 2% across all bands from April 2027, meaning the basic rate will be 22%, the higher rate will be 42% and the additional rate will be 47%.
- Income tax thresholds – these will be frozen at their current levels until tax year 2030/31, three years longer than is already the case. This is projected to pull half a million more people into the top income tax band, swelling the total to seven million this year alone. With nearly four million pushed into the basic rate and three million more into the higher rate, the announcement is forecast to raise an extra £10 billion.
- Capital gains tax (CGT) – the anti-avoidance provisions that apply to share exchanges and company reorganisations are changed with immediate effect so that the rules apply to those persons who have entered into arrangements where one of the main purposes is to secure a tax advantage. The measure applies to issues of shares or debentures on or after today, 26 November 2025. Another CGT measure announced is that CGT relief on qualifying disposals to employee ownership trusts will be reduced from 100% to 50%, and will take effect from today, 26 November 2025.
- Attracting global talent – few details are disclosed but the government appears to be considering how to develop its tax offer for “high-talent new arrivals” so that the UK remains “a competitive destination for growth-driving global talent” and supports internationally mobile individuals to establish themselves and their businesses in the UK. It appears that the government will be consulting on this in due course. This is an encouraging development and may be an incentive to attract talent back to the UK following the “non-dom” tax reforms introduced in April 2025.
- Pensions and IHT – after last year’s announcement that from 6 April 2027 unused pension funds and death benefits would no longer be exempt from IHT, concerns grew about arrangements for the payment of the tax particularly where the estate and pension beneficiaries differed. Today’s Budget includes provision for executors to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months in order to pay any IHT and, furthermore, that they will be discharged from any liability to pay IHT on pensions discovered after receiving HMRC clearance. This will be a relief for executors and help facilitate estate distribution.
- ISA allowance – the cash ISA allowance will be reduced by 40% from 6 April 2027 from £20,000 to £12,000 for all those under 65.
This year’s Budget seeks to balance fiscal responsibility with market confidence. For families, trustees and property owners, today’s speech has the benefit of bringing to an end the overwhelming speculation that has been circulated about major tax changes. Now is the time to reassess estate planning in light of these announcements and capitalise on the certainty these provide.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
Meet the team:
Emma Sear
- Partner
- Residential Property