How does the Autumn Budget affect you?

Labour’s first Budget in 15 years has landed [1] and, whilst a lot of it was expected, there remained a few surprises. Here we breakdown the headlines which could affect you and your personal finances:

Pensions

Most pension death benefits will now be subject to Inheritance Tax (IHT)

Perhaps, the most meaningful change introduced by Rachel Reeves. The Government released a consultation paper on this change following the budget. [2]

This suggests:

• Spousal exemption will apply meaning this will not impact pensions inherited between married couples or civil partners.
• If an individual dies before 75, their pension will form part of their estate for IHT purposes. The beneficiary will not pay income tax at their marginal rate when accessing this pension.
• If an individual dies after 75, their pension will form part of their estate for IHT purposes. The beneficiary will also pay income tax at their marginal rate when accessing this pension. This in effect represents a form of double taxation.

We are hopeful the double taxation element will be re-considered during the consultation prior to 2027. We will keep you informed as and when we have further clarity on this.

State Pension Triple Lock maintained

The state pension will therefore increase by 4.1% in 2025-26, in line with earnings growth.

No changes announced to the Pension Commencement Lump Sum

Rumours that Rachel Reeves would reduce the percentage of tax-free cash available from pensions have not materialised. This means that the amount of tax-free cash you can access from your pension remains the same.

Capital Gains Tax (CGT)

Main rate of CGT increased

The main rate of CGT increased with immediate effect from 10 to 18% and 20 to 24% for lower rate and higher rate taxpayers respectively. There was no update on the annual tax exemption altering, which remains at £3,000.

No change to CGT applied to second properties

This will continue to be taxed at 18% for lower rate taxpayers and 24% for higher rate taxpayers.

Inheritance Tax (IHT)

The IHT freeze has been extended from 2028 to 2030

This means:

• The nil-rate band will remain at £325,000
• The residence nil-rate band will continue at £175,000 (with the taper for the residence nil-rate band starting at £2 million)
• Qualifying estates can pass on up to £500,000 without incurring any inheritance tax, and a surviving spouse or partner can pass on up to £1 million tax-free

Changes to Inheritance Tax and alternative investment markets (AIM)

From April 2026, the 100% IHT relief available on AIM shares held for 2 years will reduce to 50%. This will result in an effective inheritance tax rate of 20%.

Business Asset Disposal Relief (BADR) will remain unchanged until April 2025

BADR will remain at 10% in 2024 before increasing to 14% in April 2025 and 18% in April 2026. In addition, the lifetime limit of BADR will be maintained at £1 million.

Significant changes to agricultural property relief and business property relief

Starting in April 2026, the 100% tax relief for qualifying assets over £1 million will be removed. Instead, relief will be provided at 50% meaning an effective inheritance tax rate of 20%.

School Fees

VAT will be added to private school fees as of January 2025

In addition, from April 2025, the business rates relief for private schools will be removed. This has the potential to impact school fees further when it takes effect.

National Insurance (NI) and Income Tax

The freeze will not be extended for income tax and NI contributions thresholds

This means they will increase by inflation from 2028. Additionally, it was announced employer NI contributions will increase by 1.2% to reach 15% from April 2025.

ISAs

There will be no changes to the current ISA subscription limits

Until April 2030, the annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs, and £9,000 for Junior ISAs and Child Trust Funds. Further, the ‘British ISA’ proposed at the last Budget will not be going ahead.