Navigating the post-Budget landscape

With a new Government has come a refreshed financial blueprint.

From capital gains and inheritance tax changes to pension asset and business and agricultural relief adjustments, the economic environment has been significantly rewritten.

Given their breadth and scope, the updates will take some time to be fully appreciated.

But with close support, like that offered by the expert advisory team at Perspective (North East), you will be able to navigate your way through the modifications.

Capital gains tax

One of the biggest announcements in the Budget came around capital gains tax, with the landscape shifting significantly.

The lower rate for non-residential properties has risen from ten per cent to 18 per cent, with residential capital gains tax rates remaining unchanged at 18 per cent and 24 per cent.

Combined with the dramatic reduction in
the annual capital gains tax allowance – from £12,300 in April 2023 to just £3000 this year – the impact is clear.

Consequently, projections suggest 570,000 people will pay capital gains tax in 2024/2025, with 260,000 liable for the first time.

Elsewhere, the capital gains tax rate payable under Business Asset Disposal Relief will increase from ten per cent to 14 per cent from April 6 2025, and to 18 per cent from April 6 2026.

Points to consider:

• Using tax-efficient vehicles, such as ISAs and pensions, can protect against future capital gains tax

• Over time, the benefits of ISAs, for example, can be considerable, with the average ISA for over-65s now exceeding £60,000 in value

Pension assets

There was a significant announcement regarding a change in the tax treatment of pension assets upon death.

From April 2027, defined contribution pension pots will be included as part of your estate and, therefore, potentially liable to inheritance tax.

In the 2027/2028 tax year, the Office for Budget Responsibility estimates 38,500 estates will pay, on average, £34,000 in additional inheritance tax due to holding pension assets.

Points to consider:

• This change will significantly impact how everyday living costs are funded in retirement
• The challenge will be to find a balance between pension and non-pension income while maintaining sufficient funding for the rest of your life

Inheritance tax

The inheritance tax threshold has remained static since 2009, with the limit frozen at £325,000, and this was recently extended to 2030.

Adjusted for inflation, the threshold would today stand at more than £500,000.

While the additional £175,000 residence allowance offers some relief for direct descendants, it doesn’t help everyone.

With the average UK home now valued at £366,000, many estates are at risk of exceeding the threshold when combined with investments, pensions and other assets.

One of the main headlines was the announcement that business relief and agricultural relief will be reformed from April 2026.

For deaths prior to April 6 2026, there will be no change.

After April 2026, the first £1 million of combined business and agricultural assets will continue to get 100 per cent relief.

The Government may also decide to restrict the transfer of tax relief between spouses and partners, though full details are yet to be confirmed.

Assets in excess of £1 million will get 50 per cent relief and be taxed at an effective rate of 20 per cent.

Business relief on AIM shares will be reduced from 100 per cent to 50 per cent, and be taxed at an effective rate of 20 per cent, but there is no upper limit to the amount an individual can invest into AIM-listed shares while qualifying for 50 per cent relief.

In addition, the stamp duty land tax surcharge for second homes has increased from three per cent to five per cent.

Your next steps

In short, there is a lot to consider, with some of the changes potentially requiring some re- planning of your existing arrangements.

And we are here to help.

Our expert teams across our national office portfolio – which includes bases in Newcastle, Darlington, Stockton, Hexham and Harrogate, North Yorkshire – will support you every step of the way, providing advice and guidance that is tailored to best manage your assets.

Perspective Financial Group

Operating from more than 40 bases across the UK, which include Perspective (North East) sites in Newcastle, Darlington, Stockton, Hexham and Harrogate, North Yorkshire, Perspective Financial Group’s local offices provide financial planning advice with client relationships that endure, on average, for more than 26 years and often span four generations of a family.

To find out more about its services, how it could support your needs in the post-Budget landscape and for office contact information, visit – www.pfgl.co.uk