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The Winter Budget is Coming: Speculation, speculation and more speculation
With the Autumn (although arguably Winter) Budget confirmed for 26 November 2025 and with the Chancellor Rachel Reeves under ever-growing pressure to address a significant fiscal gap (estimated at around £20–£40 billion), speculation is growing unabatedly and somewhat exhaustingly! While Labour maintains its manifesto pledge not to raise income tax, VAT, or National Insurance on working people the Government appears (through ongoing media speculation) to have inheritance and property in its crosshairs to plug the shortfall.
Potential changes on the horizon
So, given the constant fiscal newsfeed and the potential urgency, we have waded through the media speculation to present the key potential changes to look out for in the private client space:
Inheritance Tax (IHT)
In this Budget, we may see an announcement of a lifetime cap on tax free gifts, limiting the total amount that can be passed on exempt from IHT, even if the donor survives seven years. Possibly, instead of or in addition to this, we may see an extension of the so-called ‘seven-year rule’ to ten years, which would align conveniently with the latest IHT changes introduced on 6 April for Long-Term Residents.
Stamp Duty Land Tax (SDLT) Overhaul and Mansion Tax
Reports in various media outlets suggest a radical overhaul of SDLT, including:
- Replacing upfront SDLT with a proportional ‘national property tax’ on homes over £500,000; and
- Introducing a ‘mansion tax’ or wealth-based levy on high-value properties (possibly above £1.5 million or even £2 million).
How this applies to non-residents and owners of additional properties remains to be seen, but we would expect some form of surcharge to remain to dissuade overseas buyers from accumulating too much UK property.
Capital Gains Tax (CGT) on Primary Residences
This may shock many but the exemption on gains from selling primary residences could be removed for high-value properties, with speculation that this would apply to properties valued over £1.5 million with CGT kicking in at the excess of this.
National Insurance on Rental Income
The Government is considering subjecting private landlords’ rental income to NIC (potentially an 8% lev) affecting individual and partnership income.
What can be done?
Without wanting to dive into complex prose not turn this into an opinion piece, I will keep this punchy in the interests of time.
The key takeaways are as follows:
- Review assets in the next two months and establish (with the assistance of both lawyers and financial advisors) what assets can be gifted; and
- Consider any upcoming property transactions and establish whether to accelerate or delay pending the outcome of the Winter Budget and further clarity on SDLT reforms.
If you have any queries relating to Inheritance Tax and gifting, please contact Ben Rosen of Quastels LLP.
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Inheritance Tax: Successive Reforms to Succession
What can we expect?
According to The Guardian, the Labour Government is looking to introduce further changes to UK inheritance tax. These changes would represent a further squeeze on planning opportunities available to families, following the abolition of the non-dom regime (2025), reforms to agricultural and business property relief (2026), and bringing pensions into chargeability (2027). With these successive yearly reforms, do we have further reforms on the horizon and how might they impact succession plans?
Turning to the latest attempt by the Treasury to gauge public sentiment, ministers are considering introducing:
- a lifetime cap on gifting; and
- changes to taper relief that reduces IHT rates on gifts made between three and seven years before death.
Under the current rules, any gift (of whatever amount) made more than seven years before death is typically exempt from IHT. As for taper relief, the rate of tax levied on gifts within that seven year period ranges from 32% down to 8%. In effect, the longer you live, the more you and your heirs are rewarded.
We can only speculate for now, but might a lifetime cap apply to the donor or the donee. For example, might there be a lifetime gifting cap of £1 million to be applied across any number of beneficiaries and once that £1 million cap is hit (even if distributed among, say, 15 recipients), an immediate tax charge arises, much like a gift tax? Or, would the Government look to apply a cap on each donee (or recipient) of, say, £100,000. If this amount is exceeded, then again, it triggers a lifetime gift tax on the excess.
Beyond the speculation, with the Government exploring a range of options (including a wealth tax) to help overturn their £40 billion hole, the reality for clients is that traditional planning might soon be severely curtailed.
What to do?
If introduced, the new cap could squeeze succession and tax planning further, resulting in far greater tax liabilities and possibly the sale of assets if gifting in delayed. Combined with the reforms to APR and BPR, delayed gifting could lead to the fragmentation of family ownership of assets and businesses. A potential reform to taper relief might add insult to injury, whatever form this ends up taking.
There are, of course, other considerations to gifting including potential capital gains tax implications and the loss of control, so gifting may be as much of a psychological burden to overcome as well as one that is fiscal in nature. Given the capital gains tax element, there is always the risk of double taxation which is perhaps its own standalone article.
When should we act?
Lawyers typically answer with ‘it depends’. However, with the ongoing erosion of IHT reliefs, the time is NOW. Don’t wait until the Budget, as there will likely be anti-forestalling rules preventing you from acting once there’s ‘clarity’ means it’s too late by then.
Client’s should therefore look to:
- Maximise current exemptions: Gifts made today under the current system still benefit from full taper relief and the seven-year exemption window;
- Use every available relief: Annual exemptions (e.g., £3,000 per year), ‘gifts from surplus income’, wedding gifts, and small gifts are still intact, but these may become more restricted with anticipated reforms;
- Avoid being caught off guard: Future reforms may apply retrospectively to gifts made after certain dates or impose cumulative limits such that any delay could further erode your ability to gift tax-efficiently.
In summary
If you have assets you can afford to gift, there is no time like the present. The Guardian article is a warning of what is to come and so clients should act with certainty of the current system noting that there is a window of time before any future reforms become law.
If you have any queries relating to inheritance tax and gifting, please contact Ben Rosen of Quastels LLP.
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Does EU Law Still Apply To My Estate?
The EU Succession Regulation more commonly known as the Brussels IV (the Regulation) came into force in 2015. The main objective of the Regulation is to simplify cross-border estates and succession planning which is particularly important with more geographic mobility in the world today than ever before.
Position prior to the Regulation
Prior to the introduction of the Regulation, if an individual had connections to the UK and more than one EU member state, each state had its own rules to determine which court had jurisdiction. This in turn lead to uncertainty and complications in the estate administration.
Position after the Regulation
The key provision of the Regulation is that the court in which the deceased died habitually resident have jurisdiction in succession matters. The Regulation also does not distinguish between property that is movable or immovable.
The default position under the Regulation may, however, be overridden in two circumstances:
- Habitual residence can be displaced by an election made in an individual’s Will for the law of their nationality to apply; or
- The individual is manifestly more closely connected with another jurisdiction at the date of their death.
For example, if an individual is habitually resident in a jurisdiction subject to the Regulation, but their Will contains an election for English law to apply to their estate as this is their nationality, this could effectively apply English law to their estate across not just the UK but also other member states in which they hold assets.
How does an EU regulation effect the UK?
Despite the UK not being part of the EU, the Regulation is important for individuals who have assets and connections to the UK and an EU Member State.
In 2015, the UK was one of the few Member States to opt out of the Regulation and considered a “third state”. Practically, this means that whilst the UK is not bound by the Regulation or subject to its application, it does affect the way in which conflict of law rules in the UK interact with the EU Member States where the Regulation does apply.
It is important to add that there has been no change in how the Regulation affects the UK since Brexit.
The importance of making an election and a practical example
Rose is a UK national, who has lived in Spain for the last 15 years. She still has a property in the UK that her husband lives in, but they are separated, and she has two estranged children she has not seen for 20 years. Spain has forced heirship rules and Rose does not wish for her children or husband to benefit from her estate and instead wishes for her estate to pass to her nephews.
Rose could therefore put in place a worldwide Will that includes an election for the law of her nationality to apply to the succession of her estate therefore disapplying forced heirship. She would therefore have testamentary freedom under English law to leave her estate to her nephews regardless of the fact she is habitually resident in Spain.
A nationality election also gives greater certainty than relying on habitual residence as a default. This is particularly relevant for internationally mobile individuals who move around regularly therefore meaning that their habitual residence is changing constantly. By electing for the law of their nationality to apply to their estate, this gives them certainty of the succession of their estate in relation to their assets within the EU. Rose in this circumstance would therefore also have certainty that this will remain the position even if she moves in the future.
If you have any queries relating to cross-border estate planning, please contact Ben Rosen or Eleanor Catling at Quastels LLP.
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