Budget 2025: Key Points Our Clients Should Be Aware Of

EHL  SOLICITORS BLOG/ARTICLE

Budget 2025: Key Points Our Clients Should Be Aware Of

BY;  Leanne Hathway – Head of Taxation Services

The Budget 2025 was announced on 26th November 2025 and, amongst the headline points, there are some changes that will impact on our clients.

Inheritance Tax

Inheritance Tax thresholds have been frozen for a further year, remaining at £325,000 per person until April 2031. There is a further £175,000 allowance in respect of the family home, so a couple can pass a home worth up to £1million free of inheritance tax (assuming there is nothing else in the estate).

With assets other than the family home, it is worth mentioning that the 2024 Budget had brought into the charge to inheritance tax any unspent pension pots (this comes into effect from 2027) and had reduced the level of inheritance tax relief available for farmers and business owners.

Income Tax

The headline rate of income tax remains unchanged, but three types of income are being separated out and the rates of tax applying to those types of income will increase by 2%. These types of income are rental income, dividends and savings income.

The increased rate of tax applies to dividends from April 2026, and to the rental or savings income from April 2027.

For business owners who currently take income from their companies by dividend, this may lead to changes in how (or if!) income is taken. There are some frantic calculations being undertaken by businesses that run electric cars, in light of the mileage tax being introduced on electric vehicles. For those with high mileage, this could exceed the road tax on petrol or diesel cars. The main concerns that we are seeing, however, relates to the practicalities of how this will be administered and whether there will be a reporting burden far in excess of a traditional car tax.

For savers there are other anomalies, with tax reliefs being reduced on pension contributions made by way of salary sacrifice (this will be capped at £2,000 from 2029) and a reduction in the cash ISA allowances (there remains a £20,000 annual allowance but only £12,000 can be held in cash for contributions from April 2027 with the remaining £8,000 being available for stocks and shares ISA contributions). It is worth noting that the full cash ISA allowance remains if you are 65 or over.

One other point that clients may be interested in was not announced as part of the speech but was in the accompanying documents. That is to announce a consultation in early 2026 of the Lifetime ISA (this is aimed at first time buyers saving their deposit) and we will have to await news of any changes proposed to that.

Capital Gains Tax

No headline changes to the rates of capital gains tax as such but a few specific policies that will have considerable impact on those affected by them. Employee Share Ownership Trusts have previously enjoyed a 100% Capital Gains Tax Relief on transfers into them, but this is to reduce to 50% with immediate effect. This means that a transfer of shares to an Employee Share Ownership Trust now attracts an immediate tax charge, which may well deter these from being set up.

Incorporation Relief (which applies where a business is transferred into a new company on incorporation) will have to be claimed via Self Assessment from April 2026.

There has been an increase in the size of companies that can be eligible to be classed as qualifying for Enterprise Investment Scheme (EIS) status.

The rate of capital gains tax on Business Assets is set to increase to 18% from April 2026.

Other Tax Changes

Obviously the milkshake tax is one of the headline policies, but is unlikely to make a huge cash impact! Of more wider application is the proposed surcharge for council tax on business properties worth over £500,000 (this is to target larger commercial properties, but doesn’t seem to be a particularly high value). Businesses will need to consider whether they are going to be impacted, particularly those that sub-let space as there are concerns that shared office spaces will be amalgamated for the valuation purposes.

There will no doubt be other details to be announced in the coming months, and the apprenticeship changes mentioned by the Chancellor may be of interest to business clients. As yet, no immediate plans are announced but as the plan is to fund all training associated with apprenticeships up to the age of 25 (this age limit increasing) this may well open up opportunities.

Final Note

If any of these measures may affect you, we recommend seeking tailored professional advice. Our team at EHL Solicitors is available to discuss how the changes may relate to your personal or business circumstances.

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