Last year’s Autumn Budget, which took place on 30 October saw sweeping changes announced to Inheritance Tax (IHT), Agricultural Property Relief (APR), Business Property Relief (BPR) and pensions. The date of 26 November 2025 has just been set for this year’s Autumn Budget, and with the Treasury facing a potential fiscal gap of more than £20 billion, it is widely thought that further tax increases are likely.
Recent weeks have seen speculation surrounding changes to the taxation of property and wealth, and this is not surprising given the Government’s manifesto pledges not to increase taxes on “working people”, spanning income tax, national insurance and VAT.
Possible Mansion Tax
One of the proposals reportedly under consideration is a “mansion tax” which might take the form of removing the Capital Gains Tax (CGT) exemption which applies when someone disposes of their principal residence. Higher-rate taxpayers would be liable to CGT at 24% (the current rate – which could increase) in cases where the property exceeds a particular threshold, potentially being £1.5m. This could have a significant impact on a large number of homeowners, given the performance of the property market over recent decades. One criticism of this proposal relates to the impact it would have on those wishing to downsize, as they would then have less net cash after payment of the CGT with which to put towards a replacement property. This could disincentivise individuals from downsizing, potentially leading to market stagnation.
Property Tax
A further proposal is the abolishment of Stamp Duty Land Tax (known as Land and Buildings Transaction Tax in Scotland) on property purchases. These taxes raise a significant amount of revenue, but are argued to be a barrier to movement given the substantial amount of tax which the buyer needs to pay at a time when their resources are already likely to be stretched. It is not clear how quickly the Scottish Government will be able to replicate the changes made to Stamp Duty Land Tax, particularly as any reduction in Land and Buildings Transaction Tax will have an immediate impact on the sums the Scottish Government, via Revenue Scotland, receives daily. These property stamp taxes could be replaced with an ongoing tax, payable by the buyer, on properties worth more than £500,000. The annual rate of tax could be tiered and set by the government. For properties between £500,000 to £1m, the rate could be 0.54% on the excess above £500,000, with a minimum annual payment of £800. This has drawn criticism because it could require widespread valuation of properties and in practice would amount to a tax on income, given that the tax would need to be met from a taxpayer’s income (or liquid capital), rather than the property itself.
IHT Lifetime Giving
Another change that is reportedly being considered is a cap on IHT lifetime giving. At present, gifts made seven years before a person dies escape IHT, provided that the person making the gift did not continue to benefit from the assets given away. If the individual dies more than three years after making the gift but within the seven-year period, then any IHT liability arising on the gift is “tapered” down, with the IHT reducing by 20% each year from years three to seven. A lifetime cap could limit the amount of value which could be gifted and still fall out of account for IHT. The Treasury is also apparently reviewing the rules around the taper rate and the gifting period, with one proposal being that the “seven-year rule” would be extended to ten years. In addition, there is also mention of restrictions being placed on the “normal expenditure out of income relief” under which excess income can be gifted free of IHT. This may particularly impact those with pensions which will become subject to IHT in 2027, who may look to draw down on these and gift what they do not require.
APR and BPR
The draft legislation implementing the changes to the APR and BPR rules announced last year has now been published. This largely reflects the changes as initially announced and, importantly, indicates that the £1m allowance for assets qualifying for 100% APR/BPR will not be transferable between spouses and civil partners. This means that it would be sensible to review existing business structures and also Will provisions now to ensure maximum use of the £1m allowance across appropriate family members and Trusts.
Planning
It is not possible at this stage to predict with any real accuracy precisely what taxes will be targeted by the Chancellor next and what form any changes will take. However, given the recent focus on capital taxes attached to property and wealth, this would be an appropriate time for individuals to review their estate planning. This may include the use of gifts to accelerate any succession planning strategy. In some cases this may simply bring forward an individual’s long-term plans. In other cases, the prospect of a gift could be problematic due to the loss of control and also the potential exposure to divorce or bankruptcy risk. In these scenarios, the use of alternative structures such as Trusts, partnerships and companies could be considered.
With significant change clearly on the horizon, now is the time to take stock and plan strategically to ensure that you are well-positioned to respond to these emerging developments.
If you are looking for advice on how these potential changes may impact you, please contact our Tax team.
