Autumn Budget: Corporate tax rate changes

As expected, Chancellor Rachel Reeves announced changes during the Autumn 2024 Budget, which will impact business owners. Although this will have come as little surprise, tax changes can significantly impact the business landscape, especially when it relates to succession planning.

An increase in Capital Gains Tax rates

The lower and higher main rates of Capital Gains Tax (CGT) have increased to 18% and 24% (from 10% and 20%), respectively, for disposals made on or after 30 October 2024. Additionally, the rate for Business Asset Disposal Relief and Investors’ Relief, which reduces the rate of CGT on certain disposals, will increase to 14% from 6 April 2025, and then increase further to match the lower main rate at 18%, from 6 April 2026.

Furthermore, Investors’ Relief, which reduces the rate of CGT paid on the disposal of unlisted company shares, has also been impacted, with the lifetime limit being reduced to £1m for all qualifying disposals made on, or, after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief.

Whilst the increases will be painful for some, they are less than was feared in the lead up to the Budget.

Business Property Relief reformed

In addition to the changes to CGT, the Government has also taken the decision to reform Business Property Relief (‘BPR’) from 6^th April 2026. Agricultural Property Relief has also been reformed alongside BPR such that they interact where relevant. BPR previously enabled qualifying business assets to benefit from 100% relief from Inheritance Tax (IHT). This was a valuable relief for most business owners, easing many business owner’s succession worries, particularly where the business assets were to be inherited by family members.

This has now been reformed such that the first £1m of qualifying business assets can benefit from 100% IHT relief, whilst the excess above £1m will only be subject to 50% IHT relief. Therefore, qualifying business assets in excess of £1m will now be chargeable to IHT at 20%. This reform will have a detrimental effect on business owners, who will now have to consider alternative means to ensure that they can provide for 20% IHT on qualifying business assets above £1m. For some, this may be impractical and could force beneficiaries to sell business assets or their entire businesses to fund their IHT liabilities, which could destabilise the SME and OMB markets in the future.

Although rate increases were expected, this decision comes as shock to many. These changes will come into effect on 6 April 2026, providing business owners with a slither of breathing space to undertake any mitigation planning. That said, tax policies can be subject to further revision in each electoral cycle. With this budget seemingly penalising entrepreneurs and business owners, there may well be further revisions to BPR in the future.