Ballards tax partners Martin Adams (head of Tax) and Tim Lynch (head of Private Client) look at what John Healey’s first Budget has changed for business owners and families and what to plan for next.
Martin Adams on what it means for business owners
The Budget on October 28 was light on headline announcements but not on detail. There was no increase in capital gains tax rates, although this freeze had already been announced in the lead-up to Budget Day. Many people are calling it a holding pattern Budget, and I would agree. Bigger decisions are likely to come, which makes the next 12 to 18 months a useful planning window.
For owners thinking of selling, the lifetime limit for Business Asset Disposal Relief falls from £1 million to £500,000 for disposals on or after April 6, 2027. For someone selling with gains above £1 million, that means £30,000 more tax. We always urge caution about transactions undertaken only for tax reasons. Having said this, if a sale is already in progress and is right commercially, completing the transaction before April 6, 2027 secures the higher limit.
The most unexpected announcement was a new Founders’ Relief, which reintroduces a 10% capital gains tax rate on up to £10 million of lifetime gains for qualifying disposals from April 6, 2027. It is a positive provision, but the proposed conditions are demanding and aimed at high-growth, innovative companies, so many traditional family businesses are unlikely to qualify. The rules were published for consultation, and the detail may still change.
From April 2028, HMRC plans to tighten the rules on share buybacks and demergers. If enacted, this would effectively rule out the capital reduction demerger, the go-to structure in recent years, for unlisted companies. Owners with mixed trading and property structures, or with succession in mind, should review their structure before April 2028.
There was also good news for employers. From April 6, 2027, the Company Share Option Plan, now also known as EMI2, allows options over shares worth up to £120,000 per employee, double the previous limit, with the exercise period extended from 10 to 15 years.
Income tax on property and savings income rises by a further 2 percentage points from April 2027, which reinforces corporate ownership as the go-to structure for most property investors.
Tim Lynch on what it means for families
In our preview, I suggested that most wealth tax measures come down to four moments: selling, gifting, pensions and death. The picture after the Budget is calmer than many families feared.
Selling is where most of the change sits and it is welcome that no changes were announced to gifting. The seven-year rule and the exemption for gifts out of surplus income remain in place, and they are still among the most effective ways to help children and grandchildren.
With most unused pension funds and death benefits coming within the inheritance tax net from April 6, 2027, pensions should now form part of the wider estate planning conversation.
On death, assets are still rebased for Capital Gains Tax, so gains built up over a lifetime are not taxed again when later sold. With tax on savings income rising from April 2027, keeping the cash ISA allowance at £20,000 makes using it each year more worthwhile.
None of this calls for haste, but good planning takes time. Speak to your advisers early, so there is time to understand the numbers, consider how your will, pensions and business fit together, and involve family members or trustees where needed. The families who fare best after a Budget are usually the ones who have already done the groundwork.
The full Budget review, including a welcome profile of Francesca Hutcheson, appears in the November/December edition of Birmingham Business. Martin and Francesca also discuss the Budget on the Ballards Sound Advice podcast, and our summary of the key announcements is on the Ballards Knowledge Hub at ballardsllp.com.
This article is for general information only and does not constitute advice. Professional advice should be taken before making any decisions on the matters discussed.
