From the newly announced 'mansion tax' to the upcoming changes to Agricultural and Business Property Relief, the Autumn Budget has given high net worth individuals, business owners and retirees lots to consider.
The private client team at Cheltenham-based Lodders Solicitors shares the impact they anticipate the Autumn Budget will have – and what options individuals have now.
Was the Autumn Budget better or worse than you expected?
There was far more interest than usual in this year’s budget, perhaps owing to the fact that last year’s featured such a significant tax hike. A lot of potential measures were trailblazed beforehand, but the changes announced this year were generally not as significant as many expected.
Nevertheless, there are still important considerations to make, particularly as we pick through the detail. In the initial aftermath of the budget, markets remained steady – and most of the changes announced will be phased in gradually, giving individuals and businesses time to plan and seek professional advice.
What do you think the main aims of this budget are?
This was, arguably, a typical Labour budget delivered by a Labour government. The chancellor stated that her aims were to give relief to working families, invest in the economy to stimulate growth, cut debt and borrowing and invest in the NHS and education.
She also highlighted her intention to back British businesses. However, some commentators suggest the budget reflects the battle of the ‘three Ws’ – welfare, workers and the wealthy.
How do you anticipate business owners being affected by this budget?
As part of the chancellor’s efforts to ‘back British businesses’, she has expanded the entrepreneurial investment schemes and raised company investment limits. A three-year stamp duty holiday will also apply to the transfer of shares in companies newly listed in the UK.
Moreover, whilst income tax relief on investment in Venture Capital Schemes has been cut from April 2026, corporation tax rates remain unchanged for now. However, the rise in the national minimum and living wages will inevitably increase costs for employers.
For business owners and farmers, the £1 million cap on the 100 per cent Agricultural Property Relief (APR) and Business Property Relief (BPR) saw no change, but any unused 100 per cent relief will now be transferable to the surviving spouse, although we await further detail on the exact conditions under which this will apply.
What effect do you think this budget will have on other high net worth individuals?
It was striking that Labour is targeting ‘passive income’, as there will be a two per cent increase to the basic and higher rates of dividend income tax from April 2026, with the additional rate remaining untouched
Coupled with this, there will be a two per cent increase to the basic, higher and additional rates of savings income tax from April 2027. There will also be a new separate tax on property income with the introduction of a 22 per cent basic rate, 42 per cent higher rate and 47 per cent additional rate of property income tax from April 2027.
Whilst there are no changes to the income tax rates on ‘actively earned’ income, a stealth tax will be introduced through the further freezing of income tax thresholds until April 2031, putting many taxpayers into higher tax bands sooner than expected.
Another significant change is the new tax on homes valued at over £2 million, which will take effect from April 2028. The so-called ‘mansion tax’, implemented through a council tax surcharge, will range from £2,500 to £7,500 a year across four price bands. The challenge here is that the liability falls on the property owner rather than the occupier, meaning councils will need to identify the owners of such homes.
From April 2029, a £2,000 cap will apply to the amount that can be put into a pension and shielded from National Insurance contributions through salary sacrifice. Contributions above this level will be taxed in the same way as other employee pension contributions.
In addition, the annual Cash ISA allowance for those under 65 will be reduced to £12,000 from April 2027, whilst over 65s will retain the current £20,000 limit. The aim of this is to encourage more investment into the wider economy as the remaining £8,000 of the annual £20,000 ISA allowance for those under 65 can be invested in stocks and shares ISAs, but there is uncertainty over whether this will genuinely shift savings into productive investment.
How will this budget affect retirees?
Several of the measures outlined above will impact retirees, including the transferable unused cap on APR and BPR, the tax increase on passive income and the introduction of the 'mansion tax'. Also included in the budget – but not covered in the chancellor’s speech – was a small change to future pension rules allowing personal representatives to instruct pension administrators to withhold 50 per cent of taxable death benefits to cover inheritance tax.
This change will take effect from Monday 6 April 2027 when pensions become subject to inheritance tax. As a result, estates may experience fewer delays in settling inheritance tax liabilities, although beneficiaries may receive a reduced initial payment.
Were there any anticipated changes which didn't come to pass?
It is important to recognise what hasn’t been changed. Core inheritance tax planning measures, such as the current gifting rules, including the seven-year survivorship period, gifts of excess income and the use of deeds of variation, continue to apply.
The nil-rate band and the residence nil-rate band have also been frozen for yet more years, bringing more estates into the inheritance tax net. Because these bands are not rising in line with inflation or rising property values, there are growing calls for the government to increase these allowances and reduce the number of estates subject to inheritance tax.
What steps can high net worth individuals and business owners take now?
In light of the 2025 budget, it is important to take proactive, informed steps after advice from professional advisers, rather than simply waiting for changes to take effect.
For business owners and farmers, this starts with getting a clear idea of current values and whether BPR or APR will apply. This means obtaining up-to-date valuations and seeking professional advice as soon as possible.
Farming businesses, for example, often involve partnerships, grazing agreements and complex assets, so active steps should be taken now by all businesses to review matters, ensure ownership arrangements and paperwork are in order and confirm that wills and succession plans are clear and aligned.
For blended families, protecting capital to ensure it passes as intended, while also looking after the surviving spouse, is essential. Trusts can play a key role here, both for safeguarding assets and for planning around potential care-fee exposure.
Above all, planning early is vital, as well as keeping plans under review. An active, not passive, approach will help ensure arrangements remain fit for purpose and tax efficient as the post-budget landscape evolves.
For more information, or to contact Lodders' private client team or business services group, visit lodders.co.uk, email lawyers@lodders.co.uk, or call 01789 293259.
