Strategic Planning Considerations in Light of Upcoming Tax Changes: Guidance from Acceta

The Acceta team  has identified several critical areas of focus for strategic planning over the next 12 months in response to key fiscal and regulatory developments. This overview outlines how recent changes to Employer National Insurance Contributions (NICs), the National Living Wage, Capital Gains Tax (CGT), pensions, and Business Property Relief (BPR) will impact businesses and individuals—and what measures can be taken to mitigate their effects.

1. Employer NIC and Minimum Wage Increases: Disproportionate Impacts on Lower-Paid Employees
Recent amendments to Employer NICs and the National Living Wage will significantly increase employment costs, with a disproportionate impact on lower-paid workers.

The Autumn Budget introduced two major changes to Employer NICs:

• An increase in the Class 1 Secondary Contributions rate from 13.8% to 15%.
• A reduction in the “secondary threshold” from £9,100 to £5,000.

These adjustments will notably raise the NIC liability for employers, particularly in respect of lower-income staff. For example, a part-time employee earning £5,000 annually will now incur an additional £615 in NICs. While the Employment Allowance—available to eligible businesses—will rise from £5,000 to £10,500, larger employers with broader payrolls are more likely to exceed this threshold and thus feel the full impact.

Concurrently, the National Living Wage will rise by 6.7% to £12.21 per hour from April 2025. This equates to an estimated additional cost of approximately £1,400 per full-time employee before accounting for the increased NIC burden.

Mitigation Strategies for Employers
Employers can consider various tax-efficient strategies to reduce NIC exposure:

• Salary Sacrifice Arrangements: These enable employees to exchange a portion of their salary for non-cash benefits, such as pension contributions, electric vehicles, or cycle-to-work schemes. These benefits are typically exempt from both employee and employer NICs, delivering mutual savings.
• Share Incentive Schemes: For higher-earning employees, approved share schemes may allow the transfer of employer NIC liabilities to the employee, generally settled through the eventual sale of the shares.

2. Capital Gains Tax (CGT): Increases and Implications for Transactions
The Autumn Budget significantly restructured CGT rates:

• From 30 October 2024, the lower rate has increased from 10% to 18%, and the higher rate from 20% to 24%.
• These new rates are now aligned with the surcharge on residential property, although no changes have been made to that regime.

These increases underscore the importance of proactive portfolio management, especially with regard to using tax-efficient wrappers, allowances, and exemptions.

Additionally, Business Asset Disposal Relief (BADR) will be phased to increase from 10% to:

• 14% from 6 April 2025
• 18% from 6 April 2026

The lifetime limit for BADR remains at £1 million, but the escalating rates prompt a renewed focus on succession planning. Business owners considering disposals should evaluate whether there is sufficient time to realise gains at the current rate or, alternatively, prepare for a managed exit ahead of 2026.

Carried Interest
The CGT rate applicable to carried interest will rise from 28% to 32% from April 2025. Furthermore, proposals are under consultation to bring carried interest within the income tax regime from April 2026. Although the UK remains competitive by international standards for now, future changes could prompt a reconsideration of the UK as a base for Private Equity professionals.

3. Pensions and Inheritance Tax (IHT): Implications for SIPPs
From 6 April 2027, the value of unused Self-Invested Personal Pension (SIPP) funds will be subject to IHT as part of the deceased’s estate. The pension fund itself will be responsible for settling its proportionate share of the liability before any distributions are made to beneficiaries.

Planning Considerations for a 56-Year-Old with a £1M SIPP

• Retirement vs. Inheritance Objectives: If the primary purpose of the pension is personal retirement security, the IHT changes may have limited relevance. However, if the strategy involves preserving the pension for inheritance, it warrants reassessment.
• Lifetime Withdrawals and Gifting: Individuals may consider drawing tax-free cash or income from the pension during their lifetime and gifting the proceeds. Provided the donor survives seven years, such gifts could be entirely outside the scope of IHT.
• Surplus Income Gifting: Regular gifts made from surplus income—where the donor retains sufficient income for their standard of living—can also be exempt from IHT without the need for a seven-year survival period.

4. Business Property Relief: New Limits and Estate Planning for Family Businesses
Significant reforms to BPR are scheduled from 6 April 2026, impacting succession planning for family-owned enterprises.

Key Changes

• AIM-listed shares and similar exchange-traded holdings will see BPR reduced from 100% to 50%.
• A new £1 million lifetime cap on 100% relief will be introduced. Any value above this threshold will only attract 50% relief.
  These changes could materially increase IHT liabilities for family businesses and may force asset disposals to meet tax obligations.

Strategic Responses
Will Reviews: Ensure wills include tax-efficient spousal transfers, which benefit from CGT uplift and allow for onward tax-efficient gifting.
Lifetime Gifting of Shares:

• • To Individuals: Potential CGT deferral is available. Gifts are IHT-free after seven years.
  • To Trusts: Trusts can offer long-term protection, but incur IHT charges at transfer, every 10 years, and upon distribution. CGT holdover relief may apply.

• Life Insurance: Policies can be used to cover future IHT liabilities or enable tax-efficient lifetime gifting.
• Business Sale and Liquidation: Owners may consider exiting the business to access lower CGT rates and enable cash-based estate planning.
• Emigration: Non-UK residents are exempt from UK IHT after ten years abroad, presenting an option for globally mobile individuals.

Need Advice?

If any of the above changes are relevant to your situation, we recommend seeking professional advice tailored to your specific circumstances. For further support, please contact your usual Acceta adviser or complete the form provided.

All tax planning should be undertaken with formal professional advice, especially when approaching transactional deadlines or significant legislative changes.