Tax planning considerations for 2025

With the new year underway, now is the perfect time to plan ahead for upcoming tax changes. Stuart Noakes, Partner and Head of Tax at Carpenter Box, outlines the key tax planning considerations for you and your business in 2025.

The 2024 Autumn Budget introduced a number of significant changes impacting businesses, business owners and individuals. Notably, the changes to capital gains tax, employer national insurance and inheritance tax underscore the need for careful, proactive planning.

1. Inheritance tax (IHT)

The Chancellor announced two considerable changes to IHT that will have effect from 6 April 2026:

• Agricultural Property Relief and Business Relief can, at present, provide a 100% deduction from the value of qualifying assets. From 6 April 2026, this will apply only to the first £1 million of total value of agricultural and business property in an estate. Above that value, the relief will be restricted to 50% of asset value.

• Shares quoted on certain markets of recognised stock exchanges, such as AIM, have been eligible for 100% relief once they have been owned for two years (provided the company carries on a qualifying trading business). This relief will be restricted to 50% of value for any such shares, regardless of total value, from 6 April 2026.

Meanwhile, from 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government or other approved responsible bodies.

From 6 April 2027, an individual’s unused pension savings will be treated as part of their estate for IHT purposes (currently there is no IHT charged). This may have a considerable impact on the tax and investment planning arrangements of individuals.

2. Capital Gains Tax (CGT)

From 30 October 2024, the main rate of CGT for gains realised by individuals and trustees on the disposal of all assets is 24% (other than receipts of carried interest, which remains at 28%). Previously, the rate was 20% with a special rate of 24% applying to gains realised on the disposal of residential property that was not exempt under principal private residence (PPR) relief.

Where the gain can be matched against a taxpayer’s basic rate band, the rate is now 18% for all assets. Previously, it was 10%, except for residential property and receipts of carried interest.

From the same date, the CGT rate payable by trustees and personal representatives increases from 20% to 24% (other than receipts of carried interest, where it remains 28%).

The CGT annual exempt amount remains £3,000 for individuals and estates and £1,500 for most trusts.

Furthermore, from 6 April 2025, the special rate of tax payable when Business Asset Disposal Relief is claimed will increase from 10% to 14% with a further increase to 18% from 6 April 2026.

3. Employers’ National Insurance Contributions (NICs)

From 6 April 2025 the rate of employer NIC will increase from 13.8% to 15% and the threshold above which employers start paying employers NIC will be reduced from £9,100 per employee per year to £5,000 per employee per year.

However, eligible employers will see an increase in the annual Employment Allowance from £5,000 to £10,500. This means that, in effect, employers will only be liable to pay employers NIC when the total liability exceeds £10,500 per year. The allowance will also be available to businesses whose employer’s NIC liability exceeds £100,000 (previously such businesses have not qualified for the allowance).

Despite the rise in NIC rates and the drop in the payment threshold, the government believes that the increase in the Employment Allowance means that 865,000 small business employers will pay no NICs in the next tax year.

Information correct as of 18 December 2024.

Plan ahead with our Investment and Tax event

When:
8am-10am, Wednesday 5th March

Where:
South Lodge Hotel, Horsham

Our upcoming Investment and Tax event will provide you with practical financial and tax planning strategies for the 2025/2026 tax year. Find out more and secure your place here: www.carpenterbox.com/investment-tax-2025

Get in touch with our award-winning tax team

Our team is helping clients recalibrate their tax strategies to stay compliant and tax efficient. We can undertake a review of your financial affairs, check that you are not paying more tax than you need to and to see whether any structures you set up in the past are still appropriate.

If you would like more detailed one-to-one advice from our award-winning* tax team, get in touch with one of our friendly advisers on 01903
234094 or visit www.carpenterbox.com

*Carpenter Box was named national ‘Tax Team of the Year’ at the 2024 Accounting Excellence Awards.