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Inheritance Tax reliefs threshold to rise to £2.5 million for farmers and businesses

The level of the Agricultural Property Relief (APR) and Business Property Relief (BPR) thresholds will be increased from £1 million to £2.5 million, the government has announced.

The change will allow spouses or civil partners to pass on up to £5 million in qualifying agricultural or business assets between them before paying Inheritance Tax (IHT), on top of existing allowances.

The government says the changes come after it listened to concerns of the farming community and businesses about the reforms.

It says it will protect more farms and businesses, while maintaining the core principle that the most valuable agricultural and business assets should not receive unlimited relief.

The change will be introduced to the Finance Bill in January and will apply from 6 April.

Environment Secretary Emma Reynolds said:

‘Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.

‘We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms. We are increasing the individual threshold from £1m to £2.5 million which means couples with estates of up to £5 million will now pay no inheritance tax on their estates.

‘It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.’

Internet link: GOV.UK

Chancellor raises £26 billion in Autumn Budget

Chancellor of the Exchequer Rachel Reeves set out tax-raising measures worth up to £26 billion in the Autumn Budget.

The increases will be achieved through a range of measures, including extending the freeze on Income Tax thresholds for a further three years.

Ms Reeves also announced extra spending increasing to £11.3 billion in 2029/30, including an extra £9 billion on welfare.

Despite the uplift in spending the Chancellor has more than doubled her fiscal headroom from around £10around to around £22 billion, according to the Office for Budget Responsibility (OBR).

The OBR overshadowed the Chancellor’s speech with the accidental publication of its main measures prior to the Budget being announced in Parliament.

On Income Tax the personal allowance, the higher rate threshold and additional rate threshold are frozen at £12,570, £50,270 and £125,140, respectively, until 2030/31.

Taxes on property, dividend and saving income – which currently face no equivalent of National Insurance contributions (NICs) – will be increased by up to 2%.

From April 2029, the government will charge employee and employer NICs on any pension contributions made via salary sacrifice above £2,000 a year

The Budget also halves Capital Gains Tax relief for company owners selling their businesses to Employee Ownership Trusts from 100% to 50%.

In addition, the Budget introduced a High Value Council Tax Surcharge on homes worth more than £2 million, while protecting those on low incomes.

Individual Savings Accounts (ISAs) will be reformed from April 2027 when the annual cash limit will be set at £12,000, within the overall annual ISA limit of £20,000.

The Chancellor also took action to cut £150 off energy bills, freeze rail fares and end the two-child benefit cap.

The government is extending the 5p fuel duty cut until the end of August 2026 with rates then gradually returning to March 2022 levels by March 2027.

Ms Reeves said:

‘I can tell you today that, for every family we are keeping our promise to get energy bills down and cut the cost of living with £150 taken off the average household energy bill from April.

‘Money off bills, and in the pockets of working people. That is my choice.’

Internet link: GOV.UK

Christmas crafters urged to check tax rules

HMRC is urging those making money from Christmas crafts, seasonal market stalls, or selling festive items to check if they need to report their earnings.

As the festive season approaches, the tax authority has launched a Help for Hustles campaign.

This aims to remind anyone earning extra income from activities like making Christmas decorations, upcycling furniture for seasonal sales, or running market stalls, that they will need to tell HMRC if they earn more than £1,000.

The campaign’s guidance explains the important distinction between simply decluttering homes by selling unwanted personal belongings – which doesn’t usually require reporting to HMRC – and trading activities like making items to sell for profit, which may be taxable.

Anyone who earned more than £1,000 from side hustles in the 2024 to 2025 tax year will need to register for self assessment as a sole trader, file their return and pay any tax due by 31 January 2026.

Kevin Hubbard, HMRC’s Director of Individuals & Small Business Compliance, said:

‘Whether you’re making handmade Christmas decorations, selling upcycled furniture, or running a seasonal market stall, it’s important to understand when your festive side hustle becomes taxable trading.

‘Nobody wants an unexpected tax bill, so anyone earning more than £1,000 from their side hustle should tell HMRC. Our Help for Hustles campaign provides clear, straightforward guidance to help people get their tax right.’

Internet link: HMRC press release

CIOT calls for implementation of IHT transitional gifting rule

The Chartered Institute of Taxation (CIOT) has urged the government to implement a transitional rule to allow older farmers and other business owners to gift assets to the younger generation free of Inheritance Tax (IHT) before changes take effect in April 2026.

Current rules incentivise farmers to keep their farms until their deaths, the CIOT stated in a submission to an inquiry by the House of Lords. Its proposed changes would reverse these incentives and promote lifetime giving.

However, for older farmers where there is a risk that they could die within seven years of making a lifetime gift (but after April 2026), the gift would be ineffective for IHT purposes. According to the CIOT, a ‘cliff edge’ is thus created on 6 April 2026.

It has suggested that the risk could be mitigated by amending legislation so that any gifts of relievable assets made between 30 October 2024 and 5 April 2026 would continue to benefit from the old rules even if the farmer died within seven years.

John Barnett, Vice President of the CIOT, said:

‘We are concerned that bringing in changes to agricultural and business reliefs with a cliff-edge date of 6 April 2026 is leading to great anxiety among older clients as they are unlikely to survive seven years and therefore are unlikely to see making gifts as a solution.

‘We think that there is a straightforward and relatively low-cost transitional rule that could address this concern: allowing gifts made between now and April to continue to qualify for the 100% relief currently available. 

‘While this is not a complete solution to the problem – there may be some for whom making a gift is impractical or impossible if they have lost capacity – it should significantly reduce the risk as it gives a viable and straightforward alternative.’

Internet link: CIOT

Self-employed overcounted for decades by official data

Official statistics have overstated the size of the UK’s self-employed population for two decades, according to the Institute for Fiscal Studies (IFS).

The share of national income flowing to those with the highest incomes has also been over-estimated, adds the think tank.

The mismeasurement stems from a longstanding error in the Survey of Personal Incomes (SPI) – a dataset created by HMRC, derived from tax returns and widely used across government for internal modelling.

The number of people with self-employment income has long been smaller than official statistics suggest. Between 2002/03 and 2017/18, the SPI overcounted the number of individuals with income from sole trading or partnerships by more than 500,000 each year on average – an overestimate of around 14%.

Rapid growth in self-employment is a more recent phenomenon than previously estimated. The SPI suggests a steady rise in self-employment since 2000, but the new data show that growth was in fact much slower before 2009/10, only matching growth rates seen in the SPI after the financial crisis.

Isaac Delestre, Senior Research Economist at the IFS, said:

‘The rise of self-employed work has been one of the most important features of the UK labour market over the last 20 years.

‘But these new data reveal a different narrative to the one told by official statistics – with the period preceding the financial crisis showing much slower growth in the self-employed population than we previously thought. That begs the question: what changed after the financial crisis that led to an acceleration in the growth of self-employment?’

Internet link: IFS