We speak to Tim Lerwill, Audit and General Practice Partner, and Zoe Chandler, Chartered Tax Adviser, from our Bath office about the changes to inheritance tax (IHT) following the budget, the impact the budget has had on SMEs (Small and Medium Enterprises), and how the changes made by the Labour Government may affect the buy-to-let market.

1. There were a number of significant changes announced in the autumn budget relating to inheritance tax, Zoe what does this mean in practice and how are you advising your clients?

It was announced that Agricultural Property Relief (APR) and Business Property Relief (BPR) would be capped at £1 million with any value over £1million qualifying for only 50 per cent relief.

In practice, this means family farms and businesses that previously would have been passed to the next generation free of tax, may now have an IHT liability.

We are advising our clients to revisit their succession plans including reviewing their current business structures and wills and considering whether lifetime gifts might be suitable to achieve their succession plans. In many cases, the potential IHT liability can be mitigated through advance planning.

2. Tim, SMEs were also impacted by this budget – what is your advice to them? 

Talk with your Business Advisor

I’m advising clients to put aside time to read and understand how the budget will impact them and their business.

I suggest talking with your business advisor to go through the details and if needed, update your business forecasts for potential cashflow issues arising.

With the rise in National Insurance Contributions, up to 15 per cent from April 2025 and the rise in National Living Wage to £12.21 per hour from April 2025, these extra costs will need to be factored into your business planning.

Consider selling your business now rather than later

Business Asset Disposal Relief (BADR), which gives rise to a lower tax rate for certain business disposals, is set to be increased, but in a phased manner – remaining at 10 per cent in 2024/25, before rising to 14 per cent in 2025/26 and 18 per cent in 2026/27.

Small and medium-sized business owners are now facing a ticking clock – those looking at selling a business might want to accelerate the process to maximise the benefit of BADR. 

Factor in the new business rates

In the retail, hospitality and leisure sector, the current 75 per cent discount, which is due to expire in 2025, will be replaced by a 40 per cent discount on business rates for 2024/2025, with a maximum discount of £110,000.

For small businesses, the tax multiplier will be frozen from 2025. With all these changes, it’s essential to reconsider your business forecasts as any sales and cost adjustments might need to be communicated to customers and suppliers.

3. Zoe, the buy-to-let market has seen some changes posed by the Labour Government, but the Bath market seems to remain resilient. What’s your advice for those with property portfolios?

There is a major change to the rules for Furnished Holiday Lets, such as AirBnB style properties, coming on 5 April 2025 which will see many reliefs and allowances disappear.

There is a window of opportunity between now and then to ensure these reliefs and allowances are being maximised.

In addition, the changes to Stamp Duty Land Tax, Capital Gains Tax and mortgage interest relief rules mean that ownership structure has become even more important.

Before considering a purchase of an investment property, advice should be sought to ensure the most appropriate structure is being used.

Finally, these clients should seek legal advice to ensure they can comply with changes to legislation under the Renters’ Rights Bill which is in the final stages of parliament.