Initial thoughts on the November 2025 Budget

There was a lot to digest in today's budget. Some initial thoughts and themes:

• There will be relief for those worried about IHT: There were no major changes to IHT (thresholds remain the same, donors can still make gifts free of IHT if they survive for seven years afterwards and there was no mention of a lifetime limit on gifting). The fact that the £1m tax-free threshold for APR and BPR (applicable from April 2026) will be transferable between spouses/civil partners is welcome news.
• High-value property has taken a hit: As well as increased tax rates on property income (see below), the new council tax “surcharge” is an annual charge of between £2,500 and £7,500 on properties worth more than £2m. The government's Valuation Office will “conduct a targeted valuation exercise to identify properties above £2 million and therefore in scope” but we can still expect this to have an impact on what people are willing to bid on properties around the key thresholds (£2m, £2.5m, £3.5m and £5m). The surcharge appears to stack with the Annual Tax on Enveloped Dwellings (a charge on high value property held via companies) where that is applicable.
• This was a tough budget for investors: Higher tax rates will be introduced on various common forms of investment income over the coming years. The rates of tax on property and savings income will increase by 2% from April 2027, whilst the basic and upper rates of tax on dividends will increase from April 2026 (although the top rate of 39.35% on dividends will remain unchanged). Investors will need to review their portfolios and consider whether they should make changes to account for these changes. When doing so, it is worth noting that "savings income” includes various forms of return other than interest, including profits on offshore bonds, certain types of income from offshore funds and profits on deeply discounted securities.  
• The pensions picture is mixed: Those with existing pots should be somewhat relieved. There was no change to the tax-free lump sum, and some technical changes have been announced to how IHT on pensions will work from April 2027 which appear to make those proposals more pragmatic (even if they do not reduce the tax due). However, the introduction of NICs on salary sacrifice pension contributions will hurt many who are still saving.
• FIC planning becomes more attractive: We have already seen growing demand for family investment companies in recent years. The proposed changes will only increase interest in these as a planning option, given that corporate tax rates remain unchanged and a “FIC” will not be directly impacted by many of the new income tax rates on investments (so the comparative tax benefit of investing via a FIC rather than directly will increase in many scenarios).
• There is a lot to weigh up for business owners: The BPR change (allowing the £1m threshold for 100% IHT relief to be transferred between spouses/civil partners) will be welcome. As will some changes to the EIS and VCT regimes which will allow a greater range of businesses to make use of them. On the other hand, the freezing of NICs thresholds, increases to the minimum wage and the (already announced) changes to Business Asset Disposal Relief, combined with the reduced CGT relief available when selling to an Employee Ownership Trust, will be a concern for many entrepreneurs.
• International individuals: Various technical changes are being made to the new FIG regime, which appear from an initial review to be broadly sensible. A new limit for IHT charges on some pre-existing trust structures will also be seen as good news. Then there is the prospect of a new tax offer for “high-talent new arrivals” (although at present the Government is just seeking views on this so it is too early to say what will come of it). The fact that no exit tax was announced for individuals leaving the UK will be a great relief, including for those thinking of moving here who would otherwise be deterred.