Five key proposals left out of the UK Budget – and what it means

A week after the Chancellor of the Exchequer presented her Autumn Budget to the UK Parliament, people and businesses have largely processed what changes such as the adjustments to salary sacrifice pension schemes, or the new High Value Council Tax Surcharge (better known as the “mansion tax”) mean for them.

The more interesting story for Boodle Hatfield clients may be around what was not in the document, with several widely expected changes failing to materialise.

Hayden Bailey, Head of Private Wealth, helps clients including globally mobile individuals, families, entrepreneurs and landowners to manage their interests in a way that aligns with their goals and values. “Because the Budget did not specifically rule out any of the tax measures that were heavily trailed in the media in the weeks running up to the Budget, there remains a palpable sense of uncertainty as to what further changes the future may hold.”

This leaves key groups such as business families, entrepreneurs and other wealth holders looking at the proposals that were not included in the Budget, and what these may signal about the Government’s direction of travel.

1) A wealth tax

The government has not pursued this idea, perhaps daunted by the likely timescale that proper implementation would likely require, and the administrative burden in assessing and collecting the tax.

“A wealth tax would have been difficult to implement quickly and potentially counterproductive. Some people could have been left having to liquidate certain assets in order to pay their tax bill, while others might have moved assets including businesses offshore, or simply left the country altogether,” Hayden explains.

2) An exit tax

Changes to the “non-dom” regime in the previous year’s Budget sparked an exodus from the UK to more tax-favourable jurisdictions such as Italy, Switzerland and the UAE. For 2025, the Government decided against a charge on capital gains for people who were leaving.

“The possibility of an exit tax was of real concern to business clients who are net contributors to the economy and helping to drive growth,” says Hayden Bailey. “Many have already left or are preparing to leave and we are seeing enquiries from people who have been in the UK for their entire lives, but feel that things have changed dramatically in recent years.”

The Budget saw a new £5 million cap placed on certain high-value trusts that hold non-UK assets, which can face inheritance tax charges every ten years. “This was unexpected and suggests the UK is hoping to lure back wealthy non-doms, albeit these changes may be too little too late,” says Hayden.

Whether the 2025 Budget will persuade non-doms to return is yet to be seen, but it does provide some more time to prepare for those who had been urgently preparing to leave before a potential exit tax took effect.

3) Inheritance tax reform

Reports in the summer suggested that the Chancellor was seeking to raise more revenue from inheritance tax, potentially by reducing taper relief, extending the seven-year gifting period to ten years, or introducing some form of cap on lifetime gifts. “In the event there was not much in the Budget on inheritance tax, which suggests the Government was alive to the complexity of changing the system,” says Hayden. “Leaving lifetime reporting as it is may encourage further lifetime giving, which was prevalent before the Budget, and passes wealth down the generations where it can be reintroduced to the economy”.

Families who own farms and other businesses received a small element of good news – but only if they are married. It was announced that any unused £1 million allowance for Agricultural Property Relief (APR) and Business Property Relief (BPR) will be transferable between spouses and civil partners. “The previous Budget caused a lot of consternation, and many farming and estate businesses continue to struggle and may face selling up in order to meet the new IHT death charges.”

4) Additional rate hike on income tax

The additional rate for dividends was left static at 39.35%. “The UK already has a high dividend rate globally, so it would be difficult to increase further, particularly given the effective double taxation within companies paying corporation tax on profits before dividends,” remarks Hayden.

5) Entrepreneur incentives

The Budget included a number of provisions intended to drive investment in UK companies, such as doubling the maximum amount of investment that a company can receive under the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT) rules. What remains lacking is tax relief or incentives for founders and entrepreneurs who drive the businesses and growth agenda for the UK, another core client group for Boodle Hatfield who play a vital role in the economy.

“Why is the UK falling behind the US in encouraging entrepreneurs to build businesses, sell them and reinvest in something new within the same country?” asks Hayden. “We used to have entrepreneurs relief, but this is now limited to business asset disposal relief capped at £100k tax saving – the UK needs more incentives for entrepreneurs to build businesses here and reinvest here.”

A consultation by the Government as part of the Budget signals the intention to do more, but for Hayden, the next Budget needs to do more for this client group. “To support future business growth, effort needs to be put into increasing tax efficiency for entrepreneurs, coupled with reinvestment in the UK,” he concludes.

In the meantime, the Boodle Hatfield team are providing ongoing advice to clients on succession planning, corporate structuring, property portfolio management and more. “In our experience, most clients aren’t looking at tax as an overall driver,” says Hayden. “As a firm, we advise complex families with complex needs, considering myriad options so they are protected into the long term.”