Spring Statement 2025: Capital Gains Tax & Inheritance Tax

Following the Chancellor’s Spring Statement of last month, we’ve written a series focusing on how the resulting tax measures that were announced may affect you. In this article, we’re focusing on Capital Gains Tax and Inheritance Tax.

Capital Gains Tax (CGT)

CGT annual exemption

The annual exempt amount will remain at £3,000 for 2025/26.

CGT rates

The Capital Gains Tax rates increased for disposals, other than of residential property and carried interest, realised on or after 30 October 2024. The basic rate of 10% increased to 18% and the 20% rate increased to 24% to align with the rates applying to the disposal of residential properties.

The rate applying to trustees and personal representatives increased from 20% to 24% from the same date.

This change means that there will be no need going forward to differentiate between the types of property being disposed of after 2024/25. 

CGT reporting in 2024/25 tax returns

The 2025 tax return forms are however not equipped to deal with the mid-year changes and any disposals made on or after 30 October 2024 will have to be calculated separately.  An adjustment will need to be reported in the tax return to account for the higher rates of tax due on these transactions.

Allowances and reliefs over the year can be utilised in the way that provide the best advantage for the taxpayer.

Business Asset Disposal Relief and Investors’ Relief

The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase from 10% to 14% for disposals made on or after 6 April 2025. The rate will increase again to 18% for disposals made on or after 6 April 2026.

In addition, the lifetime limit for Investors’ Relief reduced from £10 million to £1 million for qualifying disposals made on or after 30 October 2024. This limit takes into account any prior qualifying gains where the relief was claimed.

Business owners selling or exiting a business

The increase in CGT will affect business owners planning on exiting the business by way of liquidating the business assets, although Business Asset Disposal Relief will mean this remains a tax efficient option. Business owners considering an external sale of the business may be able to take advantage of the substantial shareholding exemption (whereby a holding company can sell a subsidiary without incurring corporation tax). 

A Management Buy Out disposal will also be affected by the increase in CGT rates. However, an internal sale via an Employee Ownership Trust is not subject to CGT although the rules relating to these are subject to some minor changes and the Disqualifying Event rules for a seller will be extended from one year to four years after the end of the tax year of the sale. 

Business owners will also need to consider the changes to Inheritance Tax and the implications these will have if the business is handed down via a Will. Consideration should therefore be given to a Family Buy Out, the use of Growth Shares and Family Investment Companies in order to protect family wealth. 

Inheritance Tax (IHT)

Inheritance Tax nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and this will continue to be frozen up to 5 April 2030. An additional nil rate band, called the ‘residence nil rate band’ is also frozen at the current £175,000 level, as is the residence nil rate band taper starting at £2 million. These are also frozen until 5 April 2030.

Unused pension funds and death benefits

The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax purposes from 6 April 2027.

Agricultural Property and Business Property Relief 

From 6 April 2026, agricultural and business property will continue to benefit from the 100% Inheritance Tax relief up to a limit of £1 million. The limit is a combined limit for both agricultural and business property. Property in excess of the limit will benefit from a 50% relief, as will, in all circumstances, quoted shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM.

Furnished Holiday Lettings

The Furnished Holiday Lettings (FHL) tax regime will be abolished from April 2025. The effect of abolishing the rules will be that FHL properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses. This will apply to individuals, corporates and trusts who operate or sell FHL accommodation.

Enveloped Dwellings (ATED)

The ATED annual charges for the year-ended 31 March 2026 (i.e. the 2025/26 tax year) are as follows:    

In our next article in this series, we will be looking at how the Spring Statement may affect business owners and enterprises.  As always, please contact us to discuss your circumstances with you.

These articles have been written to provide a general guide to potentially highly complex issues. Whilst great care has been taken in the production of these articles, they are intended to provide the clients and friends of Ritchie Phillips LLP with an outline of the issues individuals, families and trustees should consider and you should seek specific advice before taking or refraining from any action.