The start of a new year is the perfect opportunity to review your financial planning and ensure that it aligns with your long-term goals. It is particularly important to review your financial affairs this year in light of the significant reforms introduced by the Autumn Budget in 2024.
Consider the following key tax planning tips for 2025.
Make use of available agricultural or business inheritance tax reliefs
Currently, qualifying agricultural or business assets can receive up to 100% relief from inheritance tax (“IHT“) under agricultural property relief (“APR“) or business property relief (“BPR“) as applicable. From 6 April 2026, the value of agricultural and business assets that can benefit from APR or BPR at 100% relief will be capped at £1 million combined, and any remaining qualifying agricultural or business assets will only be eligible for APR or BPR at 50% relief.
Draft legislation has not yet been published on these changes and we are expecting a government consultation on the measures. If you own qualifying agricultural and/or business assets over £1 million, however, it would be sensible to start considering steps you may want to take to mitigate the impact of the changes due to take effect in April 2026. Whilst we await confirmation of the details of the changes, it is possible that the £1 million allowance will not be transferable between spouses and civil partners, so one step to consider taking will be transferring agricultural / business assets to your spouse or civil partner to enable two allowances (£2 million in total) to be fully utilised.
For other steps to consider taking, please see the “APR and BPR planning points” in our Autumn Budget update.
Timing the sale of your business
Entrepreneurs and those with qualifying business assets, such as private company shares or interests in a trading business, can benefit from business asset disposal relief (“BADR“) on the disposal of those assets such that any capital gains tax (“CGT“) arising on the disposal is charged at a lower rate of 10% on the first £1 million of gains arising from the sale (rather than 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers).
From 6 April 2025, there will be a 4% rise in the BADR rate (to 14%) at which gains on qualifying assets will be taxed (and this is to be followed by an additional 4% rise from 6 April 2026). If you are thinking of selling your business, or gifting qualifying business assets, you may want to consider timing the disposal to occur before 6 April 2025 to take advantage of the current 10% BADR rate. Any contract for sale must be completed before this date in order to engage the lower rate.
Getting on the property ladder
Currently, where first time buyers are paying £425,000 or less for a residential property there is no stamp duty land tax (“SDLT“) payable on the purchase due to First Time Buyer’s Relief; and where first time buyers are paying between £425,001 to £625,000, SDLT is charged at the rate of 5% on the amount of the purchase price in excess of £425,000.
From 1 April 2025, however, the SDLT 0% threshold for first time buyers will be lowered from £425,000 to £300,000 and the discounted 5% SDLT rate will apply to the proportion of the property price between £300,001 to £500,000. Purchases of properties above the value of £500,000 will not be eligible for First Time Buyer’s Relief. If you are planning to purchase your first property in the next few months, liaise with your property lawyer as soon as possible to maximise your chances of meeting the 31 March 2025 deadline.
Selling or giving away assets
The CGT annual exemption (£3,000 for individuals and £1,500 for trustees for tax year 2024/25) cannot be carried back or forward so it is good planning to make use of it in this tax year if you are planning to sell or give away assets which have increased in value since you acquired them.
Passing assets to the next generation
If you wish to minimise the value of your estate for IHT purposes whilst retaining an element of control over your assets, consider gifting assets to a trust (of which you could be a trustee).You can currently gift up to £325,000 to a trust without incurring an IHT charge.
You can also make use of your IHT annual exemption (currently £3,000) to gift assets free from IHT. If you did not use your annual exemption in the last tax year, you can use it in this tax year instead to give you a total allowance of £6,000 to make gifts exempt from IHT. Although outright gifts are not immediately chargeable to IHT in any event, making use of the annual exemption means that the gift will not sit on your “seven-year clock” and become chargeable to IHT if you fail to survive it by seven years. Other reliefs you can use to make gifts free from IHT include the small gifts exemption of £250 per person (up to a maximum of ten people per year) and wedding gifts to relatives (a gift of £5,000 to a child, £2,500 to a grandchild or £1,000 to anyone else).
If you would like to discuss any of the tax planning tips above, or for any estate planning advice, please do not hesitate to contact a member of the Private Client team.
This article is for general information only and does not seek to give legal advice or to be an exhaustive statement of the law. Specific advice should always be sought for individual cases.