Autumn Budget 2025: Succession planning

With the Autumn Budget only a few weeks away, individuals and families should be aware of key changes and potential reforms that could significantly impact succession planning. In this article, we outline what’s known, what’s being discussed, and how you can prepare.

Changes to inheritance tax

You’re likely already aware of two sets of changes to inheritance tax (IHT) which were announced at the Autumn Budget 2024:

• IHT agricultural and Business Property Relief will both be restricted to a combined £1 million of relief at the 100% rate, from 6 April 2026 onwards. Our insight article provides further details.
• Unspent pension pots and some death benefits will fall within the scope of IHT from 6 April 2027. Our podcast episode explores this further.

For those affected by these changes, they may already be reviewing their succession plans and looking to make lifetime gifts (either to individuals or into trust) in advance of these changes coming into force. They may also be considering drawing down pensions given they will soon be losing the IHT protection afforded by the current rules.

Potential new changes

Lifetime gifts

One of the changes rumoured in advance of this Budget is the introduction of a cap on the value of lifetime gifts. This could take various forms, including an annual gift limit, a limit per recipient or an overall lifetime gift limit, with charges to IHT arising if these are breached. The current rules that exempt certain gifts from IHT provided the donor survives for seven years could also be changed.

If these were to be introduced it could create higher tax charges for many individuals wishing to pass wealth to younger generations; and could be a ‘double whammy’ hit to those who were previously relying on more than £1 million of 100% agricultural and/or Business Property Relief and are now looking to lifetime gifting to reduce their IHT exposure. A further consequence could be adding friction to the process and discussions around family business successions, which often take place during the lifetimes of the retiring shareholder(s).

CGT uplift on death

Another much rumoured measure is the potential removal of the CGT ‘base cost uplift’ on death. Under the current rules, most assets inherited will have their CGT base cost rebased to market value as at the date of death, meaning that CGT is not paid on the increase in value of the asset prior to the date of death. This is broadly considered to be a generous measure, especially when the assets in question are not subject to an IHT charge; as is the case when the assets are left to a spouse or civil partner, qualify for a 100% IHT relief, or fall within the deceased’s available nil rate band.

The base cost uplift is a significant incentive for some taxpayers to hold assets with large latent capital gains until death, rather than make lifetime gifts. If a lifetime gifting limit were to be imposed and the base cost uplift restricted or abolished, this would place some taxpayers in a position where significant charges to CGT and/or IHT are inevitable.

CGT rates and reliefs

While changes to headline income tax rates would go against an election pledge, CGT rates have been changed several times in recent years and could be a candidate for change in the coming Budget. A headline higher rate of CGT of 28% applied to most types of gain for the tax years 2010-11 to 2015-16. The 28% rate for residential property gains was only reduced to 24% in the 2024-25 tax year. Given the precedent for higher CGT rates and that this tax is predominantly paid by wealthier taxpayers, changes to the headline rate could be announced.

Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) have already been made less generous in the Autumn Budget 2024, with the CGT rate on these gains due to increase to 18% on up to £1 million of lifetime gains per relief from April 2026. The Chancellor could decide to further limit or scrap these reliefs altogether, which could be a blow to those taxpayers with interests in trading businesses or business assets who are expecting to qualify for these reliefs.

Holdover relief is a valuable CGT deferral relief that can apply on transfers into or out of certain types of trusts, and on some lifetime gifts of business assets or shares in trading companies to individuals. Changes to the conditions for holdover relief to apply or to the amount of relief available could impact on the tax efficiency of lifetime gifting and the use of trusts.

Overall conclusions

Taken on the whole, changes that increase the effective rate of CGT or IHT on transactions and successions could make current succession plans unaffordable or push them to a later date, which may not be optimal for family businesses and, additionally, may not be practical in terms of planning and implementing a smooth succession to younger generations (we examine key strategies to assist in this process in a separate article).

In some cases, internationally mobile individuals may consider leaving the UK if they deem their potential exposure to UK CGT and/or IHT to be unpalatable, in comparison to another jurisdiction. To ensure you stay informed about any Budget announcements, subscribe to receive our Budget analysis or register for one of our Budget events.

If you’d like to discuss your current succession plans and how these might be affected by the upcoming Budget, please speak to your usual Saffery contact or get in touch with Zena Hanks.

We will not know until 26 November whether any of these changes will be introduced. This article is based on potential impacts and should not be relied on as financial or legal advice. Acting solely on anticipated tax changes could leave taxpayers worse off. For guidance tailored to your circumstances, please consult a qualified professional.