As the first Budget under our new Labour government, yesterday’s announcements from Chancellor Rachel Reeves have been drawing speculation for months now. Some of the suspected targets, such as Income Tax, have been left alone, and in other cases there have been curve balls thrown into the mix which will certainly affect many Wealth Matters clients.

Here’s a summary of the key points that could affect you.

 

Capital Gains Tax (CGT)

The Chancellor announced an increase on CGT paid on profits from selling shares. The basic rate will rise from 10% to 18%, and the higher rate will increase from 20% to 24%. The rates on additional residential property sales remain unchanged, and primary residences continue to be exempt.

This applies to any disposals made as of today, although it’s currently unclear how this will work in practice.

 

Pensions & Inheritance Tax (IHT)

One of the most impactful announcements in the Chancellor’s Budget is the decision to include pensions as part of a person’s estate for IHT purposes.

As of April 2027, pensions passed on will now be subject to IHT. The exemption for spouses and civil partners remains in place. For some, this is likely to create a tax liability where they previously may not have had one at all, and for many it will significantly increase the duty due on their death. As further details emerge over the next few weeks, we’ll have a clearer idea of exactly how this change will work, and we will be reviewing what impact this has on your trust planning arrangements and any changes that may be necessary to ensure their effectiveness. Pensions have been a key tool for passing on wealth in a tax-efficient manner – we will be reviewing the details closely as they emerge.

Additionally, Reeves has extended the freeze on IHT thresholds until 2030. The nil rate band (NRB) for individuals remains at £325,000, and the residence nil-rate band (RNRB) at £175,000 for estates up to £2 million. In real terms, when taking into account inflation, this ‘stealth tax’ equals an effective rise in overall IHT liability, as more people enter the IHT liability threshold through growing wealth and value of assets.

The 25% tax-free lump sum upon taking pension benefits remains untouched, as does the state pension triple lock.

 

Personal Tax

Throughout her announcement, Reeves repeatedly promised that there would be no increase to taxation ‘for working people’.

There have been no changes to Income Tax (IT) or personal National Insurance Contributions (NIC), including maintaining the freeze on IT and NIC until 2028 as established by the previous government. This freeze will cause many working people to be pulled into higher tax brackets as a result of fiscal drag; however, the thresholds will be uprated in line with inflation from 2028 onwards, which is an unexpected positive as the freeze on thresholds was widely expected to be extended.

Stamp Duty

As of March 2025 the current Stamp Duty threshold uplift will end, and first-time buyers will now pay Stamp Duty at a rate of 5% on properties priced between £300,000 and £500,000.

In addition, the surcharge for second and additional properties has increased from 3% to 5%, effective from 31 October 2024. There’s already a lot of speculation in the press about how this may have a knock-on effect on renters, as buy-to-let properties will now attract this higher surcharge and potentially become less appealing to would-be landlords. As with any of these changes, only time will tell.

 

Non-dom scheme scrapped

The Chancellor has announced total abolition of the current Non-Domiciled tax system, effective from April 2025, taking the stance that “if you live here, you pay here”.

The scheme was already set for an overhaul following Jeremy Hunt’s final Budget back in the spring, but Labour has now taken those changes forward and further, including removing the option for non-domiciles to move their funds offshore before the full change kicks in in April. Ms Reeves cited a new ‘foreign income and gains’ regime, which would place a greater emphasis on residency.

 

Business taxes

For the employers amongst you, the announced rise to Employer National Insurance Contributions (NICs) will increase the rate that employers must pay from 13.8% to 15%, effective from April.

At the moment businesses pay a rate of 13.8% on employees’ earnings above a threshold of £9,100 a year. As above, this rate would increase to 15% in April 2025, and the threshold will be reduced to £5,000.

The employment allowance for small businesses will increase from £5,000 to £10,500, and the £100,000 threshold for eligibility has also been scrapped.

 

Alternative Investment Market (AIM)

The Chancellor also announced a raft of changes to the way that AIM shares are taxed for IHT purposes. From April 2026, AIM shares will only benefit from Business Property Relief (BPR) at 50%, meaning IHT will be payable at 20% instead of 40%. The BPR allowance is now limited to £1 million.

 

What next

In the coming days and weeks there will no doubt be additional clarity provided regarding the details of how some of these announcements will work in practice, and we will be studying these closely to ascertain how these affect our clients.

Your Adviser will discuss any changes and recommendations for you as a result of the Budget at your next meeting, however if you have any concerns in the short-term and would like further understanding of how they affect you directly, please do not hesitate to get in touch.