This Budget contained fewer headline‑grabbing tax changes than some expected, but the measures announced will still have significant implications for business owners, landlords, and families planning for the future. From the dividend and property income tax rise to the introduction of the “mansion tax,” and the welcome flexibility around inheritance tax allowances, the detail matters — and the impact will vary depending on individual circumstances.
We asked Andrew Cooper from our Tax and Estate Planning team, and James Southward from our Commercial, Agricultural and Rural Property team, to answer some key questions arising from the budget from business and property owners.
Q: Has tax on my income changed – will I have to pay more tax?
Income tax on dividends and savings will increase by 2%. This will particularly affect small business owners, many of whom take most of their income by way of dividend payments.
In addition, property income is bundled in this new 2% tax, so Landlords will be feeling the pinch too. It is widely expected this will force rents up as Landlords grapple with the extra costs. Taken together with the Renters’ Rights Act 2025, it’s a gloomy outlook for Landlords. The 2% increase only applies to personal tax however, so corporate Landlords won’t feel this quite as much, although they will still have corporation tax to consider. Private individual landlords should now be seeking advice from professional advisors on whether to incorporate or not.
Q: What is this “mansion tax”?
The “mansion tax” refers to the surcharge announced in the budget on homes over £2m. Broadly speaking, as announced, homes that have a value of £2m – £2.5m will pay an extra £2,500 per year. This rises in bands, capping out at £5,000 for homes valued at £5m or more. As part of this, properties in Council Tax bands F, G and H will go through a process of revaluation. This won’t be coming in until April 2028.
Q: I’m worried about capital gains tax which got hiked in the last budget – has it gone up again?
The rates of capital gains tax (‘CGT’) have not increased beyond those announced last year. The basic rate of CGT remains at 18% and the higher rate at 24%.
The rate of CGT is lower for those who can claim Business Asset Disposal Relief, for example on the sale of shares in a private trading business. This rate is currently 14% on the first £1million of capital gains made during a person’s lifetime. The rate will increase to 18% from April 2026, but this increase is a result of changes in the 2024 budget.
We did see a change announced for anyone considering selling their business to an Employee Ownership Trust (‘EOT’). Currently, no CGT is paid by business owners when they sell their shares to an EOT. Going forward, CGT will be payable at half the usual rate. Although the CGT benefits of selling a business to an EOT are an important factor for business owners when deciding whether to sell to an EOT, they are not the only consideration. Together with the fact that the amount of CGT payable on sale to an EOT will still be favourable to other sale structures, we do not expect to see a significant impact on the uptake of EOTs.
Q: There were lots of rumours about changes to Stamp Duty Land Tax. Did this change in the budget?
Despite lots of rumours, leaks and gossip, no actual changes were made to Stamp Duty Land Tax. The rates currently remain the same. That being said, the proposals to re-value Council Tax bands F, G and H is likely to be expanded to the other bands in the future, which could lead to at least one of the alternatives that was mentioned in the run up – having Stamp Duty Land Tax or some new form of “property” tax somehow linked to Council Tax.
Q: Were there any changes to inheritance tax?
As with SDLT, there were many rumours about changes to inheritance tax (IHT). These included changes to gifting rules requiring donors to remain alive for 10 years after making a gift to avoid IHT, and rumours of a softening of changes announced in 2024 to rules on Agricultural Relief (the so-called “family farm tax”).
In the end, none of these changes were introduced, and IHT has remained largely unchanged. However, there was one amendment of note.
Currently, gifts of agricultural property or business assets (whether made during life or on death) are free from IHT, if the assets qualify for ‘Agricultural Relief’ or ‘Business Relief’. As a result of changes made in the 2024 budget, to take effect from April 2026, each person can give away £1million of such assets qualifying for those reliefs, across their lifetime or on death, free from IHT. Any gifts above this are subject to a reduced rate of IHT (20% as opposed to the usual 40% rate). Essentially, each person has a £1million tax free ‘allowance’ to use up.
The basic position has not been changed by this budget. But it was announced that the £1million allowance can be transferred between spouses on death. Therefore, if a spouse dies without using any or all of their £1million allowance, their unused allowance will transfer to their surviving spouse, who will have a maximum £2million allowance. This is a welcome change, which will make tax and estate planning a little easier for some families, and avoid the need to ‘use up’ the allowance when the first spouse dies.
As many expected, the budget consisted of a smorgasbord of changes, many of which were – in isolation – relatively modest. Those changes impacting business and property owners discussed here, typify that approach.
If you need help with any of the above issues or are considering looking at your legal position following the budget announcements, we have a wide variety of teams who can help. Greene & Greene has experts in tax and estate planning, corporate and business law, residential property, commercial and rural property, employment and many more.
Andrew Cooper – Tax and Estate Planning – andrewcooper@greene-greene.com or by phone on 07780 780435.
James Southward – Commercial, Agricultural and Rural Property – jamessouthward@greene-greene.comor by phone on 01284 717522.
For more information on the services offered by Greene & Greene Solicitors please visit www.greene-greene.com and follow on Twitter @GreeneGreeneLaw.
This is only intended to be a summary and not specific legal advice.
