The Spring Statemtent 2026: What it Means for CGT and IHT

The Chancellor’s Spring Statement signals a continued tightening of the UK’s tax landscape. While headline Capital Gains Tax rates remain unchanged and allowances such as the £3,000 exemption are held steady, more nuanced reforms point to a clear direction of travel: reliefs are being restricted, thresholds remain frozen, and previously generous regimes are being reshaped. From the reduction in Employee Ownership Trust relief and the tightening of Business Asset Disposal Relief, to major changes in how pensions are treated for Inheritance Tax, the cumulative effect is a system that places greater emphasis on proactive planning. For business owners, investors and families alike, the message is unmistakable, standing still is no longer a neutral position.

Capital Gains Tax (CGT)

CGT annual exemption

The annual exempt amount will remain at £3,000 for 2026/27.

CGT rates

The CGT rates remain unchanged for 2026/27 being 24% other than for gains utilising any unused basic rate band for income tax where the rate is 18% on any such gains.

The rate applying to trustees and personal representatives is 24%.

Business Asset Disposal Relief 

The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase to 18% for disposals made on or after 6 April 2026.

Carried interest rates and reform

From April 2026, all carried interest will be taxed within the income tax framework. A multiplier of 72.5% will be applied to any qualifying interest brought within the charge.

Incorporation Relief 

The government will introduce a requirement for taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026. The relief previously applied automatically.

Employee Ownership Trusts

The current relief available for qualifying disposals by business owners selling their shares to Employee Ownership Trusts (EOTs) is a 100% exemption of any gain. From 26 November 2025, the relief only exempts 50% of the gain. Business Asset Disposal Relief and Investors’ Relief will not be available where the 50% exemption has been claimed. The remaining 50% of the gain on disposal will not form part of the disposer’s chargeable gain. Instead, 50% of the gain will be held over and deducted from the trustees’ acquisition cost. This will mean that it will come into charge on any subsequent disposal or deemed disposal of the shares by the trustees of the EOT.

Enveloped Dwellings (ATED)

The rates for 2026/27 are:

Inheritance Tax (IHT)

IHT nil rate bands

The nil rate band has been frozen at £325,000 since 2009 and will continue to be frozen until 5 April 2031. An additional nil rate band, called the ‘residence nil rate band’ is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2 million.

Unused pension funds and death benefits

The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for IHT purposes from 6 April 2027.

All death in service benefits payable from registered pension schemes will be excluded from the value of an individual’s estate for IHT purposes.

The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request the pension scheme administrator pay their IHT liability directly to HMRC in specific circumstances. They may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months.

Agricultural Property and Business Property Relief 

From 6 April 2026, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £2.5 million. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief.

The £2.5 million limit applies per person and is refreshed every seven years. From 6 April 2026, this allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026.

There may be a further £2.5 million allowance for trusts in certain situations but the rules are complex.

The £2.5 million limits for both individuals and trusts will be frozen until 6 April 2031.

There has been a great deal of press coverage reflecting the unhappiness of farmers with these changes. However, the changes are much broader and potentially affect the owners of many SMEs in the UK. Early IHT planning becomes critical under the new rules.

The transferability of the allowance between spouses/civil partners seems to be recognition of taxpayer concerns, as does the increase in the limit from the £1 million previously proposed to £2.5 million. However, there will still be large numbers of business owners affected by the changes.

Next steps

As always, these articles provide an overview of the various measures available, and no action should be taken without seeking professional advice.  At Ritchie Phillips, we pride ourselves on providing clear, pragmatic advice to help businesses, individuals and families. If you’d like to discuss any of the above, please get in touch.