Collyer Bristow’s Tax and Estate Planning team provide their analysis on the Labour government’s Autumn budget announced on 25 November 2025.

On Wednesday 26 November 2025, Rt Hon Rachel Reeves MP finally delivered the most leaked Budget Statement in modern British history.  The headline is that taxes, which were already at an all-time high, are to increase by a further £26bn.  That much was expected.  The important thing for the UK economy – and our clients – is how the Chancellor chose to do so.

Members of Collyer Bristow’s tax team spent Wednesday afternoon reviewing the details of the Budget changes.  As usual, the important bits tend to be buried deep in hard-to-find supplemental documents.  Our general reflection is that there are few, if any, measures in this Budget package that give cause for great celebration or alarm.  After weeks of unprecedented leaks, ill-fated ‘pitch-rolling’ by the Treasury, and endless speculation and commentary as a result, the Budget itself has been rather underwhelming.  Perhaps that should be a relief!  The consensus view is that, as one knowledgeable commentator put it, “there were many more damaging ways to raise £26bn. The Budget could have been much worse.”  That seems about right.

Further considerations may come to light in the coming days.  But the following summary represents the Collyer Bristow team’s immediate take on the Budget as it will largely affect our clients.

1. “Terrible misfortunes, most of which never happened”

Mercifully, most of the (leaked) measures that gave people the greatest anxiety didn’t materialise.  Those included:

• A CGT ‘exit tax’ on individuals;
• A wealth tax;
• NICs on partnership income;
• SDLT increases;
• A property sale tax (to replace or supplement SDLT);
• Restriction/abolition of the 7-year gift rule for IHT;
• Restriction/abolition of CGT holdover relief – especially for gifts of business assets (in many cases, being carried out in anticipation of previously announced changes to Agricultural/Business Property Relief: see below); and
• Abolition of the CGT uplift on death;

Any or all of those might easily have been included in the Budget.  The fact they weren’t will be a huge relief to most.  More thoughtful economists and tax specialists tend to think such measures would be self-defeating, because the wider damage they would cause to the UK economy would exceed the increased tax they notionally generate.  But that debate will thankfully be for another day.

Conversely, a reversal of the controversial £1m restriction of 100% APR/BPR – or at least, a commitment to pause it whilst consulting properly on it – which some had hoped for, did not appear.  Frankly, it was never likely it would.  Staggeringly, the new tax on vaping products (calculating to generate £565m by 2030-31) is predicted to raise more revenue than the APR/BPR restriction is expected to save, and the new gambling duty will raise twice as much.  To a rational person, this might suggest that the APR/BPR cap isn’t worth the candle, but the Government is expending the political capital to drive it through for reasons other than fiscal prudence.  This means that the last best hope of persuading the Government to think again is the Judicial Review claim that Collyer Bristow is bringing in the High Court on behalf of a coalition of affected farmers, business owners and entrepreneurs.  A Court date in that case is still not yet confirmed, though we are chasing for one and we hope it will happen very soon.

2. “Many terrible things have happened, and will again”

The Budget is predicted by the OBR to raise taxes by £26bn.  Some of the tax raising measures will hit hard for those affected.  In general, the Chancellor has chosen to impose tax increases with significant impacts on a small base (as opposed to small increases in rates for a wide base).  This is arguably in accordance with her stated political aim of (what she considers) “fairness”, which she equates with “how the wealthy are being hardest hit by her tax rises”.

Key measures are as follows:

2.1        IHT on UK Farming Businesses Owned via Offshore Companies

Whilst not addressed in her Commons speech, the Budget included measures and draft legislation designed to tackle several widely-used IHT planning tools.  With the exception (since 2017) of UK residential property, current rules allow individuals who aren’t “Long-Term Residents” (“LTRs” – the replacement status for “non-doms”), and their offshore “excluded property” trusts, to hold their UK assets indirectly via a non-UK company with the result that they are protected from exposure to IHT.  With effect from 6 April 2026, the Government intends to prevent that treatment for farming land and buildings, which will therefore always be subject to IHT, irrespective of whether or not they are held through a non-UK company.  The practical effect is that, for the first time, farming businesses will be treated differently from – and far worse than – other businesses investing into the UK (whose UK assets can, with careful planning, remain protected from IHT) or even UK businesses that restructure their holdings offshore.  Draft legislation was not published with the Budget, so we aren’t yet able to review the proposed implementation in detail.

2.2        Removal of Charity Tax Relief for Trusts

Commonplace gifts to trusts for charitable purposes will no longer benefit from the IHT exemption for charitable gifts unless the trust in question qualifies as a UK charity or registered club (with minor exemptions to certain ‘interest in possession’ trusts).  The stated reason for the change is that charitable trusts “may not have UK jurisdiction or be regulated.”  While charity tax reliefs were significantly limited in 2023 such that only gifts to UK charities could benefit from the IHT exemption, it seems there was a gap in the rules for charitable trusts that this change seeks to correct.  Regrettably, the new rules go far wider than necessary to correct that lacuna, and they will also catch standard charitable giving, e.g., in Wills.  The new rules will apply to all lifetime transfers on or after 26 November 2025, and to transfers on deaths on or after 6 April 2026.

2.3        Tightening of LTR “Exit Charge” on Trusts

Practitioners are acutely aware of the changes to excluded property trusts announced in the 2024 Budget.  The Government has now published draft legislation as a result of which an IHT exit charge will be imposed where UK trust assets are converted into non-UK assets, but only if the settlor of that trust ceased to be an LTR before the event that caused the situs of the trust assets to change (i.e., it prevents individuals from bringing assets into the UK before ceasing to be LTRs with a view only to avoid an exit charge).   This change is immediately effective as of 26 November 2025.

2.4        2% Surcharge on Certain ‘Passive’ Income; ISA Restrictions

There will be a 2% surcharge on the rate of tax on dividend, property and savings income, with the dividend tax surcharge coming into effect first, in April 2026, followed by property and savings income tax increases in April 2027, making the top rate of tax for those categories of ‘un-earned’ or ‘passive’ income 47%.

ISA rules will change slightly: from 6 April 2027, there will be a £12,000 cap on the cash ISA allowance, which will mean that to take maximum benefit of the £20,000 annual ISA allowance at least £8,000 must be put into a stocks and shares ISA.

2.5        Restriction on Salary sacrifice

Presently, salary sacrifice pension schemes allow employees to agree to with their employers that a percentage of their salary (in practice, without limit) be shifted into their pension, before the gross salary is subject national insurance contributions (NICs) and income tax.  However, from 6 April 2029, only the first £2,000 of such salary sacrifice employee pension contributions will be exempt from NICs, and both employees and employers will pay NICs on contributions above that amount (though the total contributions, if greater, will still be exempt from income tax).  This is a controversial decision for a government struggling with the cost of health and welfare for the elderly.  Pensions salary sacrifice schemes have incentivised sensible planning and investment for retirement and old age.  Increasing NICs receipts is intended to fund the healthcare system, yet dis-incentivising saving for retirement is likely to put a greater strain on that system.   Additionally, the increased cost of these NICs on employers may result in companies offering less generous contributions to employees overall, further reducing overall pension savings.

Given the additional and impending inclusion of pensions within the scope of IHT from 6 April 2027, announced at last year’s Budget, it seems the Government remains committed to targeting pensions as a source for untapped fiscal revenue.

2.6        Freezing Tax Allowances: Fiscal Drag

As expected, the Budget is freezing tax allowances, which will take more people into higher tax bands (not least, because of inflation), known as “fiscal drag”.  This is by far the Budget’s single biggest tax raising measure, predicted to bring in an additional £48bn by the end of the forecast period (2030-31).

3. “The days were a gray fog… but at least it wasn’t raining”

Thankfully, the Budget as a whole was not a relentless procession of bad news: it included some announcements that could best be described as “good-ish”.

These include:

3.1        IHT: APR/BPR Transferrable £1m Band for 100% Relief

The Chancellor confirmed that “The £1 million allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners.”  This reverses the original decision announced in last year’s Budget that the new £1m cap for 100% relief would not be transferrable, and it is welcome that this tax-free band now mirrors the treatment of other IHT nil-rate bands in being transferrable between spouses/civil partners.  Unlike other provisions, we don’t yet have draft legislation for this change, though we expect it should be relatively simple to achieve as the draft legislation introducing the APR/BPR cap (which we have seen) goes through Parliament.

3.2 Offshore Trusts: IHT Relevant Property Charges

In a curious policy choice, IHT Relevant Property charges on pre-30 October 2024 (non-UK) “excluded property” trusts will be capped at £5m in any one 10-year anniversary period.  The Government decided in the 2024 Budget to close what they saw as the “loophole” in previous Conservative plans, by removing the exemption from IHT for pre-existing offshore trusts created by “non-doms”.  As a result, trusts with LTR settlors subject to IHT charges of up to 6% on capital distributions, at each 10^th anniversary of the trust, and (most controversially) upon the settlor losing his/her LTR status.

Now, with retrospective effect to 6 April 2025, the total cumulative value of relevant property charges applying to such pre-2024 trusts will be capped at £5,000,000 in each of a trust’s 10-year periods. For trusts still within their first 10-year period, that cap is pro-rated down accordingly.

Subjecting “non-doms” to IHT, and especially catching their excluded property trusts within the IHT net, was – correctly – seen as the major impetus for many “non-doms” leaving the UK since this Labour Government came to power.  It seems that, by capping the total IHT charges on such trusts to £5m every decade, the Government is now belatedly trying to repair some of the (self-inflicted) economic harm it caused in respect of internationally-mobile entrepreneurs and HNW (erstwhile-/potential-) taxpayers.  One infers that the warnings given by tax professionals, including this firm, and which went unheeded at the time, are being borne out in Treasury data and that this slight relaxation in the rules for high-value trusts is the result.  But for the new £5m cap to make any difference at all to periodic charges at trust 10-year anniversaries, those trusts will need to be worth more than about £83m.

In the OBR’s report on the Economic and Fiscal Outlook, published in parallel with (and, accidentally, a little before) the Budget, they comment: “We judge that there is currently no firm evidence to change the estimated impact of the reforms on migration made in October 2024. Policies in this Budget which increase taxation on wealthy individuals could further increase the incentive for those ineligible for the new regime to migrate. However, we have not made an adjustment for this as we judge any effects are unlikely to be material. The costings remain highly uncertain and contingent on the behaviour of a small number of wealthy individuals.”

From our own work for affected clients, and anecdotally from discussions with other advisers in this field, we know that the number of “non-doms” who left the UK was very significant.  If the £5m Relevant Property charges cap is the Government’s offer to former “non-doms” to induce them (back) to the UK, then it seems destined to fail for the following reasons: (1) the reputational damage to the UK is severe, and it has already happened; (2) this change is too narrow and too small to make any meaningful difference; (3) wealthy taxpayers have no confidence that other, equally feared, new taxes on wealthy individuals won’t be introduced; and (4) other jurisdictions (in Europe, notably Italy) are making a compelling offer to international HNWs, at the UK’s expense.

“It was all very careless and confused… —they smashed up things… and then retreated back into their… vast carelessness…”

Summing up a Budget that could so easily have been so much worse isn’t easy.  There are so many fiscal and macro-economic points that could made and said to characterise it as a whole.  To many, it will seem like George du Maurier’s ‘curate’s egg’: though rotten, “I assure you! Parts of it are excellent!”  Though that judgment may depend upon one’s personal political proclivities.

The Chancellor would reject it.  When commending her Statement to the House of Commons, she said: “In the face of challenges on our productivity, I will grow our economy through stability, investment and reform.  I’ve met my fiscal rules and built our economic resilience for the future. I have asked everyone to contribute – yes,  For the security of our country and the brightness of its future. But I have kept that contribution as low as possible by reforming our tax system… …making it fairer and stronger for the future.  I have protected our NHS – maintaining public investment and driving efficiency in government spending.  I have taken action on our broken welfare system – rooting out waste and lifting children out of poverty. And I have cut the cost of living – with money off bills and prices frozen. All while keeping every single one of our manifesto commitments.”  That is how Reeves wants her Budget to be seen.  She may even believe those things herself.  The questions are whether they will turn out to be true, and whether taxpayers – especially those who create wealth for themselves and others by providing jobs and investment – will believe them.  And if true, will they be sufficient to invigorate an ailing economy?

Unless things unravel in the coming days, as they memorably did in George Osborne’s 2012 “Omnishambles Budget”, Reeves has probably done enough to stave off speculation about her own, and Sir Kier Starmer’s, positions – for now, at least.  But is this Budget the last time this Government will need to increase taxes?  Or will we be in the same position this time next year – or sooner, if an emergency Budget is needed in the Spring?  And if so, will any of the pitched but shelved tax rises make it to the statute book next time?  And in that case, what of the remaining wealth creators who haven’t upped sticks and left: will they go then, and then what?

At best, the Budget looks set to bring forward a period in which UK businesses and personal taxpayers cautiously draw breath.  Thankful(-ish) that things aren’t worse than they are, maybe, but scarcely counting their blessings.  This Budget seems unlikely in scale or ambition to precipitate transformative positive change.  It was not so much a single hammer blow – more the steady nailing down of reliefs and routes used for decades to mitigate tax.  Arguably, it was also a masterclass in political illusion, promising more generous benefits (and limited tax cuts) for headlines, with reality (on another day) left to pick up the bill.

If you have concerns about how these developments may influence your planning or existing structures, please get in touch with our Tax team for tailored support.