Financial and Tax Insights

Budget 24: Capital Gains Tax, Inheritance Tax, Pensions & Stamp Duty

In this Budget 24 Summary article, we have summarised the main changes in respect of Capital Gains Tax, Inheritance Tax, pensions and Stamp Duty and how they may affect you, your family or your business.

As always, however, you should contact us before taking any action as a result of the contents of this summary, or if you need any further help or support.

Capital Gains Tax (CGT)

CGT annual exemption

The annual exempt amount will remain at £3,000 for 2025/26.

CGT rates

The Capital Gains Tax rates will increase for disposals, other than of residential property and carried interest, made on or after 30 October 2024. The basic rate of 10% will increase to 18% and the 20% rate will increase to 24%.

No changes will be made to the rates applying to the disposal of residential properties of 18% and 24%.

The rate applying to trustees and personal representatives will increase from 20% to 24% from the same date.

The changes in the main rates of Capital Gains Tax brings them in line with those paid on disposal of residential property. This means that there will be no need going forward to differentiate between the types of property being disposed of.

Business Asset Disposal Relief

The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase from 10% to 14% for disposals made on or after 6 April 2025. The rate will increase again to 18% for disposals made on or after 6 April 2026.

Investors’ Relief

The lifetime limit for Investors’ Relief will be reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. This limit takes into account any prior qualifying gains where the relief was claimed.

Carried interest rates and reform

The rates that apply to carried interest of 18% and 28% will increase to a flat rate of 32%. This will apply to carried interest arising to an individual on or after 6 April 2025.

From April 2026, all carried interest will be taxed within the income tax framework. A multiplier of 72.5% will be applied to any qualifying interest brought within the charge.

Capital Gains Tax on liquidation of a Limited Liability Partnership

Where a member of a Limited Liability Partnership (LLP) has contributed assets to the LLP, chargeable gains that accrue up to the contribution will be charged to tax when the LLP is liquidated and the assets are disposed of to the member, or a person connected to them. The charge to tax will be on the member and the measure will have effect for liquidations that commence on or after 30 October 2024.

Business owners selling or exiting a business

The increase in CGT will affect business owners planning on exiting the business by way of liquidating the business assets, although Business Asset Disposal Relief will mean this remains a relatively tax efficient option. Business owners considering an external sale of the business may be able to take advantage of the substantial shareholding exemption (whereby a holding company can sell a subsidiary without incurring corporate tax).

A Management Buy Out disposal will also be affected by the increase in CGT rates. However, an internal sale via an Employee Ownership Trust is not subject to CGT although the rules relating to these are subject to some minor changes and the Disqualifying Event rules for a seller will be extended from one year to four years after the end of the tax year of the sale.

Business owners will also need to consider the changes to Inheritance Tax and the implications these will have if the business is handed down via a Will. Consideration should therefore be given to a Family Buy Out, the use of Growth Shares and Family Investment Companies in order to protect family wealth.

Taxation of Employee Ownership Trusts and Employee Benefit Trusts

The government is introducing a package of reforms to the taxation of Employee Ownership Trusts and Employee Benefit Trusts.

These reforms will prevent opportunities for abuse, ensuring that the regimes remain focused on encouraging employee ownership and rewarding employees.

The changes will take effect from 30 October 2024.

Inheritance Tax

Inheritance Tax (IHT)

Inheritance Tax nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will continue to be frozen up to 5 April 2030.

An additional nil rate band, called the ‘residence nil rate band’ is also frozen at the current £175,000 level, as is the residence nil rate band taper starting at £2million. These are also frozen until 5 April 2030.

Agricultural Property and Business Property Relief

From April 2026, the existing 100% rate of relief will only be available for the first £1million of property qualifying for business property and agricultural relief. Thereafter, the rate of relief for both BPR and APR will be 50% of the standard 40% rate of IHT for any qualifying assets over the £1million threshold. The rules will apply to lifetime transfers made after 30 October 2024 if the donor dies on or after 6 April 2026.

This is a significant blow for many farming and landowning families who wish to pass on an estate to the next generation as Inheritance Tax at the rate of 20% will apply to the full value of assets. There is a risk that a high number of long-standing farming businesses will have to be sold or will fail as a result. With a reprieve of only 18 months before the new rules come into effect, it is essential that those likely to be affected by the new rules engage with their professional tax advisors now to try and mitigate the impact.

Extension of Agricultural Property Relief to environmental land management

From 6 April 2025, the existing scope of Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies.

AIM listed shares

The limit for 100% relief of £1million will also apply to quoted shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM.

Pensions

Contrary to expectations, no changes were announced to the pension tax limits.

Tax limits for defined contribution pensions

For 2025/26:

The Annual Allowance (AA) is £60,000.

Individuals who have “threshold income” for a tax year of greater than £200,000 have their AA for that tax year restricted. It is reduced by £1 for every £2 of “adjusted income” over £260,000, to a minimum AA of £10,000.

Tax limits for defined benefit pensions

The maximum annual employer contribution is still likely to be between £150,000 and £180,000 per member per year, depending on actuarial considerations. The amount is based on an actuarial calculation of the contribution required to receive an annual pension of £3,750 (1/16th of £60,000).

Carry forward rules

The three year carry forward rules for contributions to either scheme remain unchanged.

Money Purchase Annual Allowance (“MPAA”)

When an individual has flexibly accessed a defined contribution pension scheme drawing pension income, the tax relief on future pension contributions is restricted. This Annual Allowance - the MPAA - remains at £10,000. Taking the tax free allowance only does not invoke the MPAA and pension contributions above this level may be made subject to the pension tax limits.

Tax free lump sum

The Lump Sum Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum, is £268,275.

The Lump Sum and Death Benefit Allowance, which relates to the general maximum that may be able to be taken as a tax-free lump sum in certain circumstances, is £1,073,100.

Unused pension funds and death benefits

The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax purposes from 6 April 2027.

The exemption between spouses and civil partners will apply avoiding a tax charge on death. But thereafter, regardless of whether you die before or after age 75, your unused pension fund will be subject to Inheritance Tax.

And if you were over 75 years of age at death, any payments from your pension fund to your nominated beneficiaries will also be subject to income tax.

Tax Efficient Investments

Individual Savings Accounts (“ISAs”). For 2025/26, the limits are as follows:

Individual Savings Accounts (ISAs) £20,000
Junior ISAs £9,000
Lifetime ISAs £4,000 (excluding government bonus) and
Child Trust Funds £9,000.

Investments in Venture Capital

There were no changes to the EIS and SEIS rules.

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. The effect of abolishing the rules will be that FHL properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses. This will apply to individuals, corporates and trusts who operate or sell FHL accommodation.

There are a number of implications from 2025/26 which are detailed below.

Pensions - individuals will no longer be able to include this income within relevant UK earnings when calculating maximum pension relief.

Dwelling-related loans - the amount of income tax relief landlords can receive on residential property finance costs is restricted to the basic rate of income tax of 20%.

Replacement of domestic items - capital allowances will no longer be available for expenditure on new plant and machinery (subject to transitional rules) but instead businesses may claim relief on the replacement of certain items.

Capital gains - the rules which allowed FHL to be treated as a trade for various Capital Gains Tax reliefs are withdrawn in relation to disposals made on or after 6 April 2025 (1 April 2025 for Corporation Tax). Rollover Relief on the replacement of business assets will no longer apply to acquisitions which take place on or after those dates. However, there are a number of detailed transitional rules to preserve certain reliefs such as Business Asset Disposal Relief in specific situations.

Losses - broadly, any unused losses can be carried forward to set against future years’ profits of either the UK or overseas property business as appropriate.

Stamp Duty Land Tax

From 30 October 2024, the additional SDLT rates applicable where an individual already owns a residential property will increase by 2%.

The higher rate of SDLT payable by companies which purchase residential property worth in excess of £500,000 will also increase from 15% to 17%. For non-UK residents the rates are increased by a further 2%. The new rates will apply to all contracts exchanged after 30 October 2024.

Transactions where contracts were exchanged before 31 October and which complete before 1st April 2025 will benefit from the old rates provided certain conditions are met.

Purchase Rate	Old Rate	New Rate
up to £250,000	3%	5%
£250,000-£925,000	8%	10%
£925,001-£1.5m	13%	15%
£1.5m+	15%	17%

Mixed use transactions are subject to a lower rate of 5%.

No changes were announced in respect of mixed use properties, properties that include non residential land or in respect of the purchase of companies that own properties (which do not fall within the scope of SDLT).

Enveloped Dwellings (ATED)

ATED rates increase by CPI. The annual chargeable amounts for ATED will be uplifted by the September CPI figure of 1.7% for the 2025/26 ATED charging period.

More Budget insights

In our next Budget 24 Summary post, we will be taking a look at the changes to Business Tax, NICs and VAT and the implications these changes may have for you.

You can find all our insights in respect of the recent Budget here:

Please get in touch for advice before you take any action in respect of the Budget or contents of this article.