BPR/APR changes

Perhaps the most heavily publicised upcoming change that is causing big shifts in the OMB and farming sectors is the restriction of these reliefs to £1m comes in from 5th April 2026 and has already resulted in a large amount of succession planning. The main opportunity pre-5th April 2026 is to be able to settle assets qualifying for BPR/APR into discretionary Trusts with no lifetime IHT due. This window will close from 5th April 2026 and restrict the value that can be introduced tax-free to £1m per Settlor, so we should be keeping this on the radar for relevant clients.

Pensions reform

Again a largely publicised change is the pension reform effective 5th April 2027. The consultation was concluded in January 2025 with the outcome released in July 2025 which confirmed the mechanics of how this change would operate. The value of a pension held by the deceased that is to be inherited by their Beneficiaries (excluding surviving spouse) would become subject to IHT at 40% as part of the deceased’s Estate. The personal representatives of the Estate would be responsible for reporting (rather than the scheme administrators). In addition, the Beneficiaries would still be required to pay income tax on the drawdown from the inherited scheme if the deceased died after age 75, creating a highly tax inefficient environment for pensions. As a result, much planning is being done around drawing down pensions and either gifting out of surplus income, or giving other income-generating assets away and using pension income to replace the lost income.  Many clients are considering a letter of wishes to direct pension pots to their surviving spouse in the meantime. 

Long term Resident (LTR) status and Foreign Income and Gains (FIG) regime

Whilst these changes were introduced to remove the concept of domicile from 6th April 2025, we should still be aware of the opportunity under the FIG regime for new arrivals to the UK to exempt their foreign income and gains from UK tax in the first 4 tax years of entry. This can (and has) created good planning opportunities for non-UK nationals to restructure their overseas tax affairs when they first arrive in the UK. On the contrary, the LTR regime gives UK residents leaving the UK the opportunity to escape the UK IHT regime without establishing a domicile of choice overseas, after ten years of non-residence.  There are longer-term planning opportunities here.

Wealth tax

Whilst this has been spoken about a lot recently there is no current consultation around introducing this tax, and with a large number of individuals leaving the UK due to recent tax policy it is (hopefully) unlikely that this will be introduced to further push taxpayers from leaving the UK tax framework. It is also worth noting that this wealth tax has been unsuccessful in other countries previously.

Property tax

The latest rumour trailed in the mainstream press centres around a property tax on main residences.  The depiction differs depending on the source, but involves two or three options – a replacement of SDLT with a property gains tax to capture the capital gain on sale over and above thresholds of £500,000/£1,000,000; an annual tax on values over the same mooted thresholds (which feels like a wealth tax) and thirdly a replacement of council tax.

Pensions higher rate tax relief restriction on pension contributions

This measure has been rumoured for a number of years, but perhaps the recent attack on pensions under IHT brings this further down the priority list of current tax changes.

Reduction in tax-free cash withdrawals from pensions

Currently individuals can withdraw 25% of their pension pot tax-free up to a maximum of £268,275 (greater where historic protection has been granted), but a recent rumour has been around restricting this tax-free withdrawal limit further. Whilst again this may be quite far down the priority list for tax changes, there is a real risk that the tax-free cash could be attacked in the near future.

“Salary sacrifice” restrictions

Initial research was commissioned by the previous government in 2023 but only published recently to explore the potential to restrict salary sacrifice tax benefits. Currently employers can achieve NIC and income tax savings by having employees sacrifice some of their salary in exchange for benefits being provided, or more frequently, pension contributions being made. Whilst not yet announced, it does seem possible that HMRC could restrict this tax saving strategy seeing as it provides the greatest benefit to the larger employers.

Capital gains increases

The recent increases to CGT were fairly negligible with the majority of the burden falling on OMB owners with largest increases around BADR relief. There may be further CGT increases – in the past we have floated the idea that CGT increases would take place at year end in April but last year went against that theory.  Any substantial rises would discourage transactions, but may encourage taxpayers to crystallise gains in the next 6 months and generate tax revenues for the Treasury.

Lifetime gifting restrictions

The latest rumours to surface surround a cap of some form on lifetime gifts perhaps by imposing a tax on lifetime gifts in a similar way to Trusts do currently on CLT’s. Also, a change to the look-back period (increase to 10 years from 7 years) and changes to the taper relief regime.  This may or may not come in but in any case if clients are considering gifts anyway then it may be worth advising making these before the budget where planning is already taking place.  These particular changes were flagged in the IHT consultation document published just before COVID hit. 

NIC on rental income

Currently rental income is exempt from National Insurance contributions, but rumours have circulated recently that policy may be introduced to bring rental profits within the scope of National Insurance in a similar way to self employed income. Whilst this policy would fit the current narrative of taxing investment property owners, this measure would have a substantial economic impact on landlords with large BTL portfolios with an expectation that many could sell properties to recognise capital gains rather than continuing to rent the property. This result would reduce the available rental market and would be in contrast to the current government policy on housing, so it would likely be introduced as part of a larger reform around rental income if considered.

ISA restrictions

This had been rumoured for a little while, but with the tax revenue requiring an increase this could be a measure brought in, but likely to be effective from April if introduced.

CGT base cost uplift on death

The recent increases to CGT were fairly negligible with the majority of the burden falling on OMB owners with largest increases around BADR relief. There may be further CGT increases – in the past we have floated the idea that CGT increases would take place at year end in April but last year went against that theory.  Any substantial rises would discourage transactions, but may encourage taxpayers to crystallise gains in the next 6 months and generate tax revenues for the Treasury