Irwin Mitchell’s Private Client Experts Share Their Views

Chancellor Rachel Reeves delivered her first Budget on Wednesday 30 October, setting out the government’s tax and spending plans.

Experts from Irwin Mitchell’s residential property and tax, trusts and estates teams have shared their views and explain how some of the announcements may affect you.

Stamp Duty

Helen Hutchison, a residential property partner at Irwin Mitchell, said:

“Whilst the expected increase to CGT for residential property didn’t materialise at today’s budget, investors were nevertheless hit by a surprise hike in the second property Stamp Duty Land Tax (SDLT) surcharge, seeing a rise of 2%, from the existing surcharge of 3%, to 5%.

“The government suggest this increase is expected to result in 130,000 additional transactions, made up of first-time buyers and those buying their main residence over the next five years, in the anticipation that the hike will see less competition from landlords or those looking to purchase second properties.

“The hike comes into force from Thursday 31 October. Investors and those purchasing second properties will be rushing to exchange contracts this afternoon, after which, the surcharge will apply to all second property purchases in England and Wales. Thankfully, those who have already exchanged contracts, or who manage to exchange contracts by close of business today, will remain liable for the current surcharge of 3%.

“The increase in this surcharge, originally introduced in April 2016, will no doubt have a significant impact on those purchasing a second property. In addition, the rate payable by corporate bodies for purchases of property with a value of over £500,000 will increase from 15% to 17%. Such increases may well result in deals collapsing or having to go on hold whilst the impact of this additional charge is considered by those affected.

“On 23 September 2022, the threshold for SDLT for residential property was increased from £125,000 to £250,000 for all purchasers. At this time, the first-time buyer threshold was also increased from £300,000 to £425,000. Both these increases were imposed as a temporary measure and are due to come to an end in March 2025.

“Whilst this may see a short-term boost to the residential property market in the typically quieter winter months in the run up to March 2025, this extra expense for first time buyers and buyers in general will no doubt create another hurdle for those looking to move or get on the property ladder.

“CGT rates for residential property, linked to the owner’s income tax banding and subject to personal allowances, however remain the same. The current rates being 18% for standard-rate tax-payers and 24% for higher-rate taxpayers.

“The rate for higher-rate tax payers was reduced from 28% to 24% earlier this year under the previous government, initially for one year only, and this rate appears to be kept in place. The widely anticipated changes today are that other forms of gains are brought into line with residential property, ending the period when gains on residential property were subject to a surcharge.”

Capital Gains Tax

Ashley Hill, a partner in Irwin Mitchell’s tax, trusts and estates team said:

“With effect from Budget Day, the Capital Gains Tax (CGT) rates will increase, with the top rate rising from 20% to 24%.

“Similarly, while the Business Asset Disposal Relief (BADR) limit will remain at £1 million, the rates will increase from 10% to 14% from 6 April 2025 and further to 18% the following year.

“Given these upcoming changes, it would be prudent to consider selling qualifying business assets before these rate increases are implemented, subject to any anti-forestalling legislation which is introduced.

“With effect from 6 April 2025, the CGT rate on the disposal of carried interest will increase to 32% from the current 28% rate. This adjustment is much more sensible than aligning it with the 45% rate of income tax, as it’s important to protect London’s status as one of the world’s leading private equity hubs.

“However, we might still see individuals leaving the UK before selling their interest to avoid the CGT charge, provided they remain non-resident for a sufficient period.”

Inheritance Tax

Kat Wainman, a partner at Irwin Mitchell specialising in wills, trust and estate planning, said:

“From 6 April 2026 Agricultural and Business reliefs from inheritance tax will continue to apply at 100%, but only on the first £1m of qualifying assets; the rate of relief will then fall to 50%.   The new rates will apply on deaths, lifetime transfers and to assets held in trust, with anti-forestalling provisions for lifetime transfers from today. 

“For trustees, the £1m 100% allowance will apply to each trust created before today, but trusts created from 30 October 2024, by a single settlor, will share the £1m inheritance tax free allowance.  Close analysis of the detailed rules will be needed, once we have them, but at first blush it seems that there will be greater reliance on early advice and planning, lifetime giving, valuations, and perhaps heritage reliefs for those who have that option available.

Non compliance

Liz Beadsley, a partner and tax advisor at Irwin Mitchell, said:

“The government has sent a clear message about closing the tax gap, aiming to raise an additional £6.5 billion in tax per year by 2029-30.  They are recruiting an additional 5,000 compliance staff with the first 200 starting training next month which given the lengthy delays at HMRC is welcome news. 

“Alongside this a consultation on new ways to tackle non-compliance has been announced. The government are also targeting tax debt with funding for 1,800 debt management staff and focusing taxpayers' minds on paying their tax on time by increasing the interest rate charged on overdue tax by 1.5%.  The current rate of interest is 7.5%.  This change will apply from 6 April 2025 and is expected to raise an additional £255m in its first year, falling back slightly to £215m by 2027/28.”