Autumn Budget Update: Major tax reforms are here

What the Reforms Mean for You and Your Business and How to Prepare

The Chancellor’s Autumn Budget introduced a series of significant reforms affecting business owners, family wealth planning, and long-term succession strategies. Below is a summary of some of the most relevant changes for small and medium-sized enterprises (SMEs) and their advisers, and what these changes will mean in practice.

1. Employee Ownership Trusts (EOTs): New 12% Tax Rate – the (effective) end of EOTs for SMEs?

EOTs have been a popular succession route for SME owners for many years, buoyed by the tax-free exemption for such owners when selling their qualifying shares in this regard. This was the position until last week, when the government announced (with immediate effect) an increase in the related tax rate i.e. from 0% to 12%. This will be achieved by ensuring that only 50% of the gain arising on a disposal of qualifying shares to an EOT will be tax free; with the balance being taxed at the headline Capital Gains Tax (CGT) rate of 24%.

In addition, the Government has confirmed that the 50% element of any gain to be taxed, will not be eligible for Business Asset Disposal Relief (BADR) (that would otherwise serve to reduce the effective rate of tax to below 12%). 

Given the headline rate of CGT is 24%, and BADR on a market sale can already reduce the rate of tax on the first £1m of chargeable gains to 14% (18% from April 2026), one wonders if a potentially modest tax saving achieved by selling to an EOT will be enough for business owners to choose this option over selling to the market.   

This saving may be even less appealing following the tightening of related EOTs rules in last year’s Finance Act (which included a potential 4–5-year tax relief clawback).   

Previously, many SME owners often required a clear incentive to consider selling their shares to an EOT for the benefit of staff whereby the agreed purchase price would commonly be paid to them on a deferred basis – the related 0% tax rate served that purpose.  Without a significant tax saving (and the need to pay a 12% tax bill up front), this will present new challenges for the EOT market.

2. Inheritance Tax (IHT):  Modernising and Tightening the Regime

The 2025 Autumn Budget introduces further targeted reforms to various IHT measures with the primary aim of modernising related systems and raising revenue fairly. These changes continue the government’s move toward narrowing eligibility and increasing scrutiny of business assets used in succession planning for IHT purposes.

Key 2025 Measures:

• New transferable unused Business Property Relief (BPR) and Agricultural Property Relief (APR) allowance
  From 6 April 2026, any unused portion of a deceased person’s £1 million BPR/APR allowance (at the 100% rate) will be transferable to a surviving spouse or civil partner — even if the first death occurred before 6 April 2026. 

  Whilst this will not provide any relief to the draconian changes to the BPR/APR allowances announced at the Autumn Budget 2024, it does provide a more sensible approach for married couples.

• Unused pension funds and death benefits
  Personal representatives will be able to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay IHT due in certain circumstances.

• Capping trust charges on excluded property

  For pre-30 October 2024 excluded property trusts (broadly a trust created by a non-UK domiciled individual that holds non-UK situated assets), a £5 million cap will apply to relevant property charges over each 10-year cycle for IHT purposes from 6 April 2025.

• Anti-avoidance reforms(effective 26 November 2025 onwards)
  The government will legislate to close specific IHT avoidance routes, including: 

  • treating UK agricultural property held in non-UK entities as UK-situated (from April 2026).

  • preventing the use of trust “situs changes” to avoid exit charges; and 

  • restricting charity exemptions to direct gifts to UK charities and clubs.

3. Capital Gains Tax: Key Anti-Avoidance Reforms

CGT Anti-Avoidance on Share Exchanges & Reorganisations

With immediate effect, the government is modernising the anti-avoidance rules for share exchanges and company reorganisations. Draft legislation (Finance Bill 2025–26) aims to ensure that these transactions cannot be used to defer or avoid tax through artificial structuring that the persons involved would not ordinarily have been entitled to.  This will be particularly relevant for group reorganisations, pre-sale restructuring and cross-border share transactions.

4. Loan Charge: Response to the 2025 Independent Review

The long-running Loan Charge issue has been revisited, with the government committing to implementing a second round of changes as a result of the latest review undertaken by Ray McCann CTA (Fellow), ATT following on from the first review conducted by Sir Amyas Morse almost six years ago.

What’s changing:

• A new settlement opportunity will be introduced by HMRC for those taxpayers who used planning arrangements captured by the Loan Charge rule that have yet to settle their related tax position with HMRC. The aim of this settlement opportunity will be to offer sufficiently generous terms to encourage the maximum number of taxpayers to resolve their tax position with HMRC.

• Additional compliance activity around disguised remuneration schemes where taxpayers choose not to settle their related planning arrangements under the new settlement opportunity. 

Impact on SMEs:

While this review is intended to resolve uncertainty, it arguably signals renewed HMRC focus on historic planning arrangements captured by the Loan Charge rule. Businesses and individuals that have undertaken related remuneration planning may face additional queries and/or require professional support to assess their exposure and establish their related options.

Summary — What This Means for Business Owners & Their Advisers

Budget 2025 reinforces a consistent direction of travel across business succession, trusts and capital taxes: 

·  narrower statutory reliefs (BPR/APR) 

·  reduced CGT reliefs (EOT disposals) 

·  expanded HMRC scrutiny of ownership structures and share reorganisations 

·  modernised anti-avoidance measures for both CGT & IHT purposes

·  a new settlement opportunity for ongoing loan charge cases 

·  stronger governance expectations for trusts, pensions and business assets 

These reforms do not remove existing planning opportunities — but they do make timing, structure, and expert guidance more critical than ever.

How Qubic Can Help

At Qubic, we specialise in helping business owners and advisers navigate complex tax reforms with confidence. Our team provides tailored strategies that are aligned with related government and HMRC policies covering:

·  Succession planning and company ownership restructuring

·  Employee Ownership Trust advisory and compliance reviews

·  Wealth and legacy preservation through appropriate trust and corporate solutions

·  Valuations, governance, and long-term asset protection

In a shifting tax landscape, proactive planning is essential. If you would like a confidential review of how these changes may affect your business or clients, our team is here to help.

Protect your wealth. Preserve your legacy. Plan with confidence. 
Speak to Qubic today. 

For more information on our tax planning services and to discuss your options with one of our team, simply click the link below:

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