With spring around the corner and hopefully an end to the grey and cold of the winter, the government’s first months in office have had mixed reviews. From the scrapping of the winter fuel allowance for those not otherwise receiving state benefits to increased employer national insurance levels, measures taken to replenish public finances have not been universally popular. More recently, the Autumn Budget introduced a potential change in pensions taxation that will affect those who have structured their estate planning to pass on pension funds in their wills.
This dramatic potential change in pensions legacy rules mean the funds, currently (and until April 2027) exempt from inheritance tax (IHT), will be brought into the IHT net and beneficiaries of pension death benefits could have to pay, in effect, up to 67% in tax. You may need to take a whole different approach to passing on assets, instead funding retirement with your pension rather than money from ISAs or other income, and factoring lifetime gifts into your inheritance strategy.
The winter months are often cheered by planning for holidays in warmer times to come, but for those involved in providing holiday accommodation the new tax year could alter previous operations. Changes in the holiday rental market have been softened with a provision for carrying forward any losses from previous or existing property into the new tax structure for 2025/26. Property owners operating under the previous furnished holiday letting (FHL) rules can bring forward any unused losses and set them against future earnings. From April, however, the previous FHL tax regime will end and such holiday properties will be subject to the same tax rules as buy-to-lets. While this change in legislation has removed the opportunity for most FHL businesses to operate as a trade, some will still qualify, although there is no clear delineation on this point so those on the margins may need advice.
Despite the loud controversy following the Chancellor’s apparent targeting of business owners to fill the funding gap at the Treasury, the October Budget announcement regarding the 110% rise in employment allowance is likely to improve profits for the smallest of employers, covering increases in employer national insurance contributions (NICs). The increase to employment allowance is restricted to companies paying under £100,000 in NICs for the 2023/24 tax year in 2024/25; but in 2025/26 bigger businesses will also be included.
With the shift to the tax year accounting basis from last April, those who have not yet aligned their accounting year to the calendar will find increased administrative burdens. Although the due date for the 2023/24 transition year has passed, you can amend your return for up to a year afterwards.
We discuss these issues and other stories in our latest Spring 2025 newsletter.