OTHER ANNOUNCEMENTS

CAPITAL GAINS TAX (CGT)

As we head into 2026/27, it should be remembered that, for most sales of capital assets, CGT will apply at 18% for basic rate taxpayers and 24% otherwise. The rate of CGT for business asset disposal relief (BADR) purposes will increase from 14% to 18% from 6 April 2026.

Particularly in relation to business disposals, timing is important, so please do talk to us about optimising your tax position prior to any capital disposal.

There were a couple of significant changes for CGT in the Budget on 26 November.

INHERITANCE TAX (IHT)

IHT can apply to certain lifetime transfers/gifts and also on the value of an individual’s estate at the time of death. The IHT nil rate band is £325,000, with an additional £175,000 ‘residence nil rate band’ available in some cases for leaving the family home to direct descendants. For any value remaining after the nil rate bands and IHT reliefs and exemptions, the maximum rate of IHT remains at 40%.

The IHT nil rate band remains frozen at £325,000 for a further year until 2031. The residence nil rate band will also remain frozen at £175,000 until 2031.

The residence nil rate band continues to be withdrawn where an estate has a net value over £2 million.  The residence nil rate band is tapered away at a rate of £1 for every £2 above £2 million.

Where there has been no restriction on the residence nil rate band, a married couple will continue to have a combined IHT allowance of £1 million.

IHT reliefs for business owners and farmers

100% relief  IHT agricultural property relief (APR) and business property relief (BPR) will be capped at up to £2.5 million of combined agricultural and business property. Thereafter, the available relief reduces to 50%.

Any unused APR or BPR allowance will be transferable to the surviving spouse or civil partner. This means that together, a couple may be able to pass on up to £2.5 million free of inheritance tax where their estates include agricultural and/or business property.

Also, from 6 April 2026, the BPR available on AIM shares and similar investments will simply reduce from 100% to 50%.

Paying tax by instalments

The inclusion of more agricultural and business property within the IHT net inevitably means more tax is payable. From April 2026, the ability to pay IHT in interest-free instalments over 10 years will be extended to include all property which is eligible for APR and BPR.

Pension funds

From April 2027, the value of unused pension funds will be included in an individual’s estate at death, regardless of any efforts by individuals to write their policy into trust. This is to counter what the government perceived as an increasing trend of using pensions as a method for tax planning rather than for simply funding an individual’s retirement.

Incorporation relief

For transfers of a business on or after 6 April 2026, a claim for incorporation relief will be required.

Incorporation relief applies to individuals, partners in a partnership and trustees where a business is transferred to a company in exchange for shares.

Claims for the relief have previously been automatic with the ability to elect out. From 6 April 2026, claimants must include a claim in their self assessment tax return for the tax year of transfer. They must provide brief details of the transaction, the relevant tax computations and the type of business transferred.