• The chancellor confirmed important changes to inheritance tax reliefs that may require a reassessment of legacy plans for some clients.
  
  
• Advisers play a crucial role in assessing the financial planning needs of their clients and Vanguard aims to support you in navigating these changes.
  
  
• No two clients are identical. The extent to which the Budget changes will impact each client will vary. It is important to be proactive, but also make the engagement on the Budget relevant to the individual.
   

The unveiling of the Autumn Budget brought with it changes that may increase the complexity of financial planning for some clients.

While the chancellor’s measures included important changes to inheritance tax (IHT) reliefs and increases in the rates of capital gains tax (CGT), rumoured changes to pensions tax reliefs and individual savings accounts (ISAs) did not come to fruition.

Beyond the specific measures, the announcement is an opportunity for financial advisers to engage with clients and lead them through the evolving fiscal landscape.

Vanguard’s commitment to delivering value to investors recognises the crucial role of good financial advice in helping individuals achieve their financial goals.

In this article, we run through the key policy changes, explore the potential impact on a typical client and the solutions that an adviser could offer. We’ve also produced a client-friendly download that may be useful in explaining the changes and their implications.

What are the changes?

Inheritance tax

The chancellor announced some important changes to inheritance tax (IHT). Below we list the key changes.

Making pensions subject to IHT:

One of the most significant changes revealed by the chancellor is the inclusion of pension assets in an individual’s estate for IHT calculations. Previously, pension assets were typically exempt from IHT. From April 2027, unused pension funds and death benefits payable from a person will be included in an individual’s estate for IHT calculations, which means they will be subject to a 40% tax.

Removing business property relief:

Currently, investors can pass on certain business assets to their beneficiaries free from IHT when they die. This is known as ‘business relief’ and it includes shares listed on the Alternative Investment Market (AIM). To qualify for business relief, the shares must have been held for more than two years at the time of death. From April 2026, AIM shares will be subject to IHT of 20%. Other business relief-qualifying assets will be IHT-free up to £1 million, but assets over £1 million will be subject to IHT of 20%

Freezing the nil-rate band:

The chancellor announced a two-year extension to the IHT threshold freeze until 2030. That means the main threshold – or ‘nil-rate band’ – remains at £325,000, rising to £500,000 for assets passed to direct descendants. Assets held beyond this amount are taxed at 40%. Married couples and civil partners can transfer any unused element of their IHT nil-rate band to their living partner when they die, which means a couple effectively has a joint nil-rate band of £650,000.

There is also an additional ‘residence nil-rate band’, which is £175,000 (depending on the total estate value). This allowance applies to those leaving property to direct descendants. Again, this can be transferred to the surviving spouse or civil partner, meaning a couple has a joint residence nil-rate band of £350,000.

Overall, a couple could potentially pass on up to £1 million before IHT becomes due.

Capital-gains tax

The chancellor announced that the rate of capital gains tax (CGT) will increase from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher-rate taxpayers. The changes are effective immediately.

Today’s announcement could make bed and ISA and bed and pension strategies even more valuable.

However, investors will need to balance the risk of any possible tax changes with the risk of being out of the market for longer than initially planned and missing out on potential further gains.

Were there any other tax changes?

The chancellor announced that the rate of employer national insurance (NI) will increase from 13.8% to 15% from April 2025. The threshold at which employers become liable to pay NI on employers’ earnings has also been reduced from £9,100 to £5,000 per year until April 2028. Thereafter, the threshold will increase in line with inflation as measured by consumer price index.

While the move won’t affect clients directly, it could result in businesses trying to cut costs by limiting pay rises or pay benefits, like pensions. Clients focused on retirement may want to consider paying more into their workplace pension or contribute more to a personal pension.

Your clients need you

Financial advisers have a crucial role in helping clients meet their long-term financial goals. Financial planning is complicated, even more so when the legislation environment changes, sometimes bringing with it a need to adapt.

The changes from the Autumn Budget present an opportunity to proactively engage with clients, strengthening those relationships with reassurance and quality advice.

No two clients are identical. The extent to which these legislation changes will impact each client will vary. It is important to be proactive, but also make the engagement on the Budget relevant to the client. 

While most clients will be impacted in some way, the proposed changes to inheritance tax could be very significant to high-net-worth clients focused on their legacy planning. Clients who have taken measures to acquire assets that are exempt from inheritance tax over time, including preserving their pension so it can pass tax-efficiently to future generations, may now be facing a much larger inheritance tax liability than previously anticipated.  It will also affect business owners who had anticipated that their privately owned companies would not attract tax when passed to their beneficiaries.

With estate planning, a diversified approach is often beneficial. The changes to IHT demonstrate that anchoring to one specific strategy carries risk.

Now is an opportune time to re-engage with clients on their estate planning, have a fresh conversation and adjust their approaches accordingly. It also presents an opportunity to bring your client’s children (or intended beneficiaries) into the conversation, where appropriate, to lay the groundwork for a smooth wealth transition and get the family prepared for the future. Read more on the importance of strengthening relationships with inheritors ahead of the ‘great wealth transfer’.

Vanguard support

We’re committed to supporting advisers in guiding clients through the changes and any uncertainty that may linger over what the announcement means for investors. As part of that support, we invite you to join us on 7^th November for a special webinar in which we’ll delve deeper into the implications of the Budget changes for investors and markets. Register now.

We also encourage you to visit the Vanguard 365 portal, which we created this year to help advisers address the growing complexities of financial advice. The portal includes a wide array of tools and resources, including industry insights, continuing professional development (CPD) education and events that augment industry knowledge and expertise. Register now.