The 2025 Budget marks one of the most significant shifts in personal tax and wealth planning in recent years. According to the Office for Budget Responsibility (OBR), the measures announced will raise an additional £26 billion a year by 2029–30, pushing the overall tax burden to a record 38% of GDP by 2030–31. While the Chancellor emphasised the need for investment, stability and long-term reform, many individuals, business owners and farming families will feel the impact on their income, estates, and retirement plans.
Over the past year, our Private Client team has closely followed the Government’s evolving approach to pensions, property and wealth taxes. In 2024, we published a series of articles on the proposed changes to pensions and estate planning — including the forthcoming inheritance tax charge on pension pots. This year’s Budget confirms several of those measures, while adding further reforms that will require careful, early planning.
Pensions and Retirement Savings
From 6 April 2027, unspent pension pots will fall within the scope of inheritance tax (IHT). As we outlined in last year’s articles, this fundamentally changes how pensions can be used in estate planning. Under the new rules, Personal Representatives (PRs) will have increased control over the distribution of pension funds and may delay payments for up to 15 months while IHT is settled. Importantly, if additional pension funds are identified after the estate has been finalised, PRs will not be personally liable for any unexpected tax.
For individuals who have used pensions as a tax-efficient asset to pass on, this accelerates the need to review and restructure overall estate plans. It is also important to review who the nominated beneficiaries of the pension are and how this affects the Will provisions.
ISA Allowances for Under-65s
From April 2027, the overall ISA allowance remains at £20,000 annually — but with a significant change for individuals under 65. Only £12,000 may be held in cash, with at least £8,000 invested in stocks and shares. The Government’s aim is to stimulate investment in UK markets, but early reactions suggest that many savers, particularly those approaching retirement, may need support understanding investment risk and balancing their portfolios.
For clients using ISAs as part of tax-free savings strategies, this change reinforces the importance of forward planning and appropriate investment advice.
Tax Rises on Income, Dividends and Property
A series of incremental tax rises will come into force:
- Savings income: Up 2% for basic and additional rate taxpayers from April 2027.
- Dividends: Up 2% at both basic and higher rates from April 2026.
- Property income: Introduced as a separate category with rates of 22%, 42% and 47% depending on your tax band, from April 2027.
For clients with rental portfolios or significant investment income, these changes may alter the most tax-efficient ownership structures.
High-Value Property Tax
From April 2028, an annual surcharge will apply to residential properties worth more than £2 million. Homes valued between £2 million and £5 million will attract a £2,500 annual charge; those worth more than £5 million will attract £7,500. This will sit alongside traditional council tax and will be relevant to clients with high-value properties or those considering gifting or passing these assets in later life.
Agricultural and Business Property Relief (APR and BPR)
The Budget confirmed the previously announced £1 million cap on 100% relief for both APR and BPR from April 2026. The most notable update is that these allowances will be transferable between spouses and civil partners — even where the first death occurs before April 2026.
On the surface, this offers welcome flexibility, particularly for farming families wishing to delay succession decisions until the second death. However, the relief remains subject to strict qualifying conditions, and in some cases, postponing tax planning may miss opportunities to secure relief on assets that change in use or value over time. For our commercial and farming clients, early review remains essential.
Business Asset Disposal Relief from Capital Gains Tax and Other Measures
From April 2026, the Business Asset Disposal Relief tax rate (formerly Investors’ Relief) will rise from 14% to 18%. This relief reduces the rate of Capital Gains Tax due on certain disposals of business assets. This will affect SME businesses, and we advise those business owners to seek personal tax advice so they can understand what tax will apply and what is the best course of succession planning.
The Budget also extends the freeze on income tax and national insurance thresholds until April 2031 and confirms a new mileage tax for electric vehicles from 2028. Collectively, these measures draw more taxpayers into higher bands and increase long-term liabilities.
Our View
Commenting on the Budget, Laura Staples, Head of Private Client at HK Law, said:
“This Budget represents a clear shift towards higher taxation on wealth, assets and long-term savings. While many of the headline changes are phased, their cumulative effect will reshape how individuals plan for retirement, manage investment income and transfer wealth to the next generation. The earlier you review your position, the more options you will have. Our advice is simple: take steps now to lock in existing reliefs, understand the new landscape and plan ahead with confidence.”
How HK Law Can Help
With so many reforms scheduled over the next five years, early and informed planning is crucial. We are here to help you navigate the changes and understand what they mean for you, your family and your estate.
You can book a free 30-minute discovery call with our Private Client team to review your circumstances and discuss the best way forward.
