After the October 2024 Budget drastically changed the rates and allowances to both Capital Gains Tax (CGT) and Inheritance Tax (IHT), Rachel Reeves’s November 2025 budget was thankfully a lot quieter on these taxes.
Inheritance Tax
After significant changes to Agricultural and Business Property Relief (APR and BPR), along with the continued freezing of the nil rate bands and other thresholds, the OBR forecasted that IHT will raise £9.1 billion, equivalent to 0.7% of all tax receipts.
Whilst there were no more fundamental changes to IHT, the chancellor did announce a continued freezing of the nil-rate band, residence nil-rate band, and the 100% rate of APR and BPR for a further year, from April 2030 until April 2031.
At present, around 1 in 20 Estates are subject to IHT but coupled with inflation and the freezing of thresholds, this announcement is likely to bring more Estates within the charge to IHT. The government forecast that the continued freezing of the threshold will raise an additional £130 million from 2031 onwards.
The Chancellor also announced that the £1 million 100% relief rate of combined APR and BPR assets will now be transferrable between spouses, as is the case with the nil-rate band and residence nil-rate band. This means that couples with combined APR and BPR assets of £2 million would not pay any IHT on these assets.
Capital Gains Tax
The Budget introduced an immediate change to Capital Gains Tax (CGT) relief on disposals to Employee Ownership Trusts (EOTs), cutting the relief from 100% to 50%.
An EOT is a structure where a company’s shares are held in trust for employees. Previously, selling a majority interest in shares to an EOT was completely exempt from CGT, but this advantage has now been halved.
The Treasury expects the measure to raise around £0.9 billion annually from 2027–28 onwards.
The Office for Budget Responsibility (OBR) noted that its forecast includes behavioural adjustments, anticipating that individuals may delay disposals to reduce CGT exposure. It also applied a lower elasticity than in previous costings, as the ability to use EOTs for tax mitigation will be significantly reduced.
This follows last year’s Budget changes, which increased CGT rates to 24% for higher-rate taxpayers and 18% for lower-rate taxpayers, implemented immediately at the time.
According to today’s report, CGT receipts are projected to reach £20 billion in 2025–26, equivalent to 0.7% of GDP, representing a 50% increase compared to the previous year.
If you have any questions about how the budget might affect you, do get in touch on 01242 776000 or tax@randall-payne.co.uk.
