DOES THE BUDGET AFFECT ME?
The recent Budget brought some unexpected new and increased taxes surrounding inheritance tax and capital gains amongst others. Here are some ways the budget changes may affect you.
Inheritance Tax
Pensions left on death will be taxed
At the moment, if you leave the unused portion of your pension pot to your heirs, it is not counted as part of your estate. If you die under the age of 75, the recipient can keep or spend it with no tax due at all.
If you die at 75 or older, then they can put the money tax-free in a pension pot, but when they take money out it is added to their income and income tax is charged.
For deaths from April 2027, any money left in a pension pot will be added to the rest of the property, money and possessions. If the total is above the threshold, it will be subject to Inheritance Tax of 40%, and if you die aged 75 or over, the recipient may also have to pay income tax when they withdraw it. No Inheritance Tax will be due if the pension is left to a spouse or civil partner.
Farms and businesses
From April 2026 there is increased tax. From April 2026 only the first £1 million on agricultural and business property will be free of tax with everything above that taxed at 20%. Unlisted shares – eg on the AIM market – will no longer be exempt after two years but taxed at 20%.
Tax Thresholds
They stay frozen but this presents a problem. By 2027/28 the new State Pension will have probably risen to more than the personal tax allowance. This means that for the first time pensioners will be paying income tax on their state pension.
Capital Gains
This will hit second homeowners particularly if they wish to sell. Also, if you sell shares then you will have to pay more. The rates rose on budget day from 10% of the gain for basic rate taxpayers and 20% for higher rate taxpayers to 18% and 24% respectively. The first £3,000 of any gain is ignored and you can also deduct expenses.
