At GBI Magazine, we recently aimed to determine the industries thoughts and perceptions surrounding a range of topics that are widely being discussed within the tax-efficient investment space.
With the election and very recent autumn budget dominating the industry, investors and clients likely have lingering questions surrounding how a new government might affect business property relief, along with possible changes to the IHT regime on pensions, and alterations to CGT rates, affecting clients’ decisions.
Industry experts and professionals have shared their views on the factors mentioned, and the results can be read below:
1) With the Labour budget impacting schemes that provide Business Property Relief (BPR), will this impact how often you recommend these solutions to clients?
With the 2024 autumn budget recently being announced by Chancellor Rachel Reeves, a defining factor that was announced is that BPR (business property relief) was one of the factors affected. Pre-budget, there was no limit on the relief from Inheritance tax which could be claimed. However, the government have announced that, if there are any funds over £1M, 50% of the value will be taxed at the usual IHT rate of 40%. With the changes being said to be implemented from the 6th of April 2026, we gained insight into how industry professionals felt about recommending BPR solutions to clients going forward.
75% stated that this would impact client recommendations, while a much smaller percentage of votes said this would not affect their decision-making process in the future. Responses largely depend on which type of BPR advisors are looking to recommend to their clients.
2) How do you anticipate changes to the IHT regime on pensions will influence the client’s use of this vehicle?
Pensions were a hugely dominating element of the autumn budget. The announcement was made that, commencing on the 6th of April 2027, almost all pension benefits that are unused after death will be included in the deceased’s estate for IHT purposes. This ultimately means that a higher percentage of estates will be taken over the IHT threshold.
The majority of professionals (75%) said they believe the changes will maintain current pension allocations and won’t have a detrimental effect on clients, while 25% said they believe the changes will increase pension allocations to best adhere to the new regulations which will come into play in 2027.
3) Will the changes to the CGT rates encourage clients to use alternative tax-efficient solutions such as BPR products, investment bonds, ISAs, pensions etc?
The budget revealed that a higher rate of BPR would be implemented for disposals made on or after the 30th of October 2024. The higher rate has initially been increased from 20% to 24% for taxpayers that fall into this band, applying to any excess capital gains realised by individuals not falling within the lower rate band which saw an increase from 10% to 18%.
75% shared that they don’t believe the changes will push clients to use alternative solutions and things will remain largely the same without huge recommendations being made. The remaining 25% feel that this change will bring an increase in clients and individuals that are altering their long term financial strategies to include the use of solutions such as investment bonds, ISAs and pensions.
This percentage of professionals also believe that the need for further planning will be more necessary than previous decision-making due to having to factor in aspects such as how this affects IHT and retirement to try and minimise the force of increased capital gains tax.
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