We always knew that there were going to be no giveaways in the Budget, even with a (slightly) more positive backdrop, as the Chancellor was committed to meet their fiscal rules and ensure market stability. And we expected some pain – the one-off hefty changes had been ruled out, but we knew that these would be replaced by the more subtle changes scattered across the tax framework.

But what did we get? Well, a lot of what we expected, some things that we didn’t, but no rabbits out of the hat… as they had already escaped! Read more by following the links below.

Target set on property, savings and dividend income

Pension relief is sacrificed

The ‘mansion tax’ is here!

Employee ownership trusts… only half as good as they used to be

Incorporations brought under the microscope

Business tax round up

Not much new for inheritance tax

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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The changes will apply at different times and in slightly different ways:

Dividend income

There will be an increase by 2 percentage points in the ordinary rate (rising from 8.75% to 10.75%) and the upper rate (rising from 33.75% to 35.75%) with effect from April 2026. The additional rate will remain unchanged at 39.35%.

The dividend allowance (although of little value these days) will remain as is.

Savings income

There will be an increase by 2 percentage points across all bands, meaning that the basic rate will rise from 20% to 22%, the higher rate from 40% to 42%, and the additional rate from 45% to 47%. These changes will apply from April 2027.

The starting rate for savings and the personal savings allowance will remain in place at their current level.

Property income

This is currently taxed at the standard rates of income tax, but a new tax rate will apply for all property income from April 2027. Property income is defined as any income from the letting of land and buildings, and the delayed introduction is due to the need to allow time for software and systems to be updated to apply this change.

Property income falling within the basic rate, higher rate and additional rate bands will be taxed at 22%, 42% and 47% respectively.

Relief for finance costs will continue to be provided at the basic rate of tax (although this will be by reference to the new property tax rate of 22%) while other reliefs (such as the property allowance and rent a room scheme) will be unaffected.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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So, what’s the benefit – well, pension contributions benefit from income tax relief, but not national insurance contributions. If an employee makes a pension contribution out of their net pay, they will benefit from income tax relief (basic rate relief being claimed by the pension scheme, higher rate relief being claimed by the employee) but there is no ability to claim back the national insurance suffered by the employee or the employer.

A salary sacrifice arrangement works by an employee giving up the right to an element of their gross pay with their employer agreeing to make an additional pension contribution on their behalf – the employee saves national insurance (because their gross pay is reduced) and the employer generally shares their national insurance saving with the employee too, meaning they are no worse off but the contributions to the employee’s pension scheme is increased.

It is proposed that this benefit will be capped – although employees will still be able to enter into salary sacrifice arrangements in respect of pension contributions, the national insurance saving will only apply to the first £2,000 each year. Any amount above this level which is sacrificed will be subject to national insurance contributions on both the employee and the employer. This change is due to come into effect from 6 April 2029.

Things could be worse when it comes to pensions – there had been speculation over reducing the income tax relief available or removing the ability to withdraw a tax-free lump sum… neither came to life this time.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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The charge will depend upon the value of the residential property, starting at £2,500 (for properties exceeding the £2 million threshold) and raising to a maximum level of £7,500 (for properties worth more than £5 million).

It is suggested that this will apply to ‘homeowners’ rather than ‘occupiers’, which suggests that this will apply to investors who hold an interest in residential property as well.

It is proposed that this surcharge will sit alongside the existing council tax charged, that relevant properties will be revalued every five years and that the charges will increase in line with CPI inflation each year from 5 April 2029 onwards.

However, as we have seen with other property taxes (such as the annual tax on enveloped dwellings), once it is seen to work, the entry threshold has been brought down to capture more and more properties – only time will tell if the same approach is taken here.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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On the introduction of EOTs, they were sold as bringing the ‘John Lewis’ model to more businesses (the ownership of the company being held for the benefit of the employees), but it is fair to say that in many cases, the tax benefit attached to EOTs has become the main driver, and the old adage of ‘letting the tax tail wag the dog’ has now led to a watering down of the provisions, with immediate effect.

Although subject to legislation being enacted, the draft legislation suggests that only half of the capital gain on the sale to an EOT will be exempt from capital gains tax – the half brought into tax will be taxed at the main rate of capital gains tax (currently 24%), with no ability to claim business asset disposal relief or investors relief. So in effect, qualifying disposals to EOTs will be taxed at 12%.

As with the original provisions, the element of the capital gain which is not brought into charge will be deferred, and brought back into charge if the EOT disposes of the shares in the future. All other conditions remain the same, as does our advice… only consider an EOT if the circumstances fit.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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This relief applies to the transfer of a business, which is much wider than the definition of a trade, and can include a property business – although whether holding properties is a property business is a question of fact, and generally turns on the degree of activity.

However, this relief is not always desired – although it is not possible to make a claim for business asset disposal relief on the sale of a trading business to a connected company, it may still be beneficial to sell a business to a company and pay capital gains tax at 24%, leaving the proceeds on loan account to be drawn down in the future without any further tax liabilities.

Where the conditions are met, the relief applies automatically, however, it is possible to elect out of them at this stage.

Changes were announced at the Budget which will take effect from 6 April 20026, and are twofold:

• Any claim for incorporation relief will need to be made in the taxpayer’s self-assessment tax return in the year the incorporation took place, with particular details of the transaction (including the type of business transferred) being disclosed. This seems to be targeted at the incorporation of property businesses, to allow cases to be identified to review and determine if a ‘business’ actually exists; and

• Removal of the ability to elect out of the incorporation relief provisions – this option will simply be removed, which is presumably aimed at cases where the desire is to be taxed on the market value of the business and leave the consideration outstanding on loan account. It will still be possible to structure the incorporation to ‘fail’ the conditions (simply by not transferring all of the required assets to the company) but it would seem that these transactions will be under much greater scrutiny.

Given the change to the taxation of property income then we are likely to see more property businesses incorporated, and therefore more cases under the microscope.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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Capital allowances

A new 40% first year allowance for expenditure incurred on or after 1 January 2026 will be available to cover expenditure where the annual investment allowance or full expensing relief is not available – this will allow for tax relief to be claimed on 40% of the cost of the relevant assets, with writing down allowances being available on the balance.

The focus of this change is mainly for unincorporated businesses and businesses acquiring assets used for leasing, where they spend in excess of the annual investment allowance, as neither of them qualify for full expensing relief.

With some give, there is also take – alongside this change will be a reduction in the main rate of writing down allowances from 18% to 14% with effect from 1 April 2026 (for corporation tax purposes) and 6 April 2026 (for income tax purposes). This will hit unincorporated businesses and businesses acquiring assets used for leasing more, spreading the relief of the remaining 60% of the cost of the assets over a longer period of time.

Writing down allowances for the special rate pool will remain at 6%.

Vehicles

With the move to electric and hybrid vehicles, and the loss of revenue from fuel duty, a new ‘per mile’ tax charge will be introduced for electric vehicles (3p per mile) and plug-in hybrid vehicles (1.5p per mile) from April 2028.

Enterprise schemes

From 6 April 2026 the thresholds (gross assets, annual investment and lifetime investment) applied to determine the eligibility for companies to meet the criteria for the enterprise investment scheme (EIS) and venture capital trusts (VCT) will increase, but the income tax relief available to an individual investing in a VCT will reduce from 30% to 20%.

Enterprise management incentive (EMI) schemes

From 6 April 2026 the thresholds applied to determine whether companies can offer an EMI scheme to their employees will increase significantly – the level of company options will be increased from £3 million to £6 million; gross asset limit will be increased from £30 million to £120 million; the maximum number of employees will be increased from 250 to 500.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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Although there were some changes around excluded property trusts (to help lighten the blow of the changes to domicile rules), the key announcement was in relation to the £1 million lifetime limit for business relief / agricultural relief, in that this will now be able to be transferred between spouses and civil partners.

This potentially makes life a little more straight forward, without the need to engineer a disposal by the first spouse or civil partner that passes to make sure that they benefit from their allowance.

Otherwise, things were fairly quiet – no change to the ‘7 year rule’, to gifts out of income or the rebasing of assets for capital gains tax purposes, which many had worried about. That said, there is still a lot to understand in relation to the changes announced at the Budget last year, with many of them taking effect from 6 April 2026.

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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The big tax giveaway was a further reduction to the rate of national insurance and to help families further, we had a long overdue attempt to correct the high income child benefit charge provisions… read more here

Property was a hot topic with a reduction in the higher rate of capital gains tax applying to residential properties, removal of the relief applying to multiple dwellings for stamp duty land tax purposes and the abolition of the furnished holiday letting regime… read more here

In the spirit of getting rid of things, we had the announcement to abolish the non-dom tax regime – a big steal from the opposition on a policy they have put forward, the benefit of which they would spend differently… read more here

From a business perspective, real mainstream tax measures were few and far between – the VAT registration threshold was increased to £90,000 (although with inflation over recent years, this is neither here nor there), the reduction in national insurance for the self-employed and some tweaking around the edges for some corporation tax reliefs available to theatres, orchestras, museums and galleries.

But in reality, what does this all mean? Yes, we have a couple of changes which will take effect from 6 April 2024, but for others, who knows who will be in power in twelve months time and whether those other announcements will ever actually come into effect.

In the meantime, all we can do is wait. Wait for the growth in the economy, wait for the date of the General Election… oh, and wait for Tax Administration and Maintenance Day, for another bundle of documents, the content of which may never come into force!

If you would like to discuss this in further detail, please get in touch with your usual contact or e-mail us at experts@tacs.co.uk.

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