Spring Statement 2025

The amount an individual can contribute to an ISA in the tax year stays at £20,000.

The Office of Budget Responsibility report states that it is likely the government will not exceed its financial rules for the current year, reducing the pressure for future tax rises in the autumn 2025 budget; though the reduction in growth target still gives little margin for error.

With inflation expected to average 3.2% this year and forecasted not to drop to 2% until later part of 2026, there is unlikely to be major reductions in interest rates this year.

There was no announcement on when the result of the consultation on undrawn pension benefits being subject to Inheritance Tax would be published.

The tax position remains unchanged for the tax period beginning April 2025 as follows: -

• Inheritance Tax (‘IHT’) rates allowances freeze extended to 2030. Due to assets and property prices rising with inflation, more estates are likely to become subject to IHT. The first £325,000 can be inherited tax-free. IHT rate stays at 40%.

• If, on the first death, a married person, or person in a civil partnership, leaves their estate to the surviving partner or spouse that gift remains tax free.
• When the second spouse or civil partner dies, their estate can benefit from the unused allowances from the first to die.
• If a matrimonial home or house where the civil partners lived forms part of the estate passing directly to a child or grandchild of the marriage/civil partnership, the Residence Nil Rate Band can be claimed. This excludes from IHT the first £175,000 of the value of the property. The allowance is subject to taper relief for estates over £2 million. This allowance can be doubled in the survivor’s estate if left unused on the first death.
• For deaths after 6 April 2027, the value of pension benefits not inherited by a surviving spouse or civil partner (but not pensions in payment) will be included in an estate when calculating IHT. Income drawn from the fund by a beneficiary will be subject to income tax.
• Combined Business Property Relief and Agricultural Relief is restricted to first £1million of assets and the balance is taxed at 50% of the usual 40% IHT rate.
• Gifts made more than 7 years before death are excluded from IHT along with the first £3,000 in a tax year gifted to one individual and first £250 of gifts to any other individual in a tax year.

Capital Gains Tax (‘CGT’) will apply on gains over £3,000 with tax applied at 24%, with a reduced rate of 18% for gains other than on the sale of property (so long as the gain when added to income does not £50,270). Gains on the sale of a principal private residence are not liable for CGT.

For further discussion regarding your Wills, or estate planning, please contact the Private Client New Business Team on 020 8290 0440 or email privateclientnewbusiness@thackraywilliams.com