Overview of Key Reforms
The UK’s Budget 2025, legislated in the Finance Bill 2025-26, brings in three major reforms effective 6 April 2026 for many investors, particularly in agriculture, private equity, and asset management. These are:
| Reform | What’s Changing | Who's Affected |
|---|---|---|
| Agricultural & Business Property Reliefs (APR & BPR) | First £1 million of combined business + agricultural assets enjoy 100% relief; amounts above that taxed at 50% relief. Reliefs transferable between spouses/partners. | Landowners, farms, estates with mixed agricultural and business assets. (gov.uk) |
| Business Asset Disposal Relief (BADR) & Investors’ Relief CGT Rate | These “lower rate” reliefs increase to 18% to match the main lower rate of Capital Gains Tax. | Sellers of qualifying business assets, founders, investors using these reliefs. (gov.uk) |
| Carried Interest Regime | A newly revised framework aligns carried interest taxation wholly within income tax rather than separate CGT rates. | Private equity partners, fund managers and carried interest recipients. (gov.uk) |
Implications & Specific Scenarios
Estate Planning & Intergenerational Transfers
- Asset threshold for full relief: Estates with mixed agri + business assets under £1 million retain 100% relief; exceeding that triggers tapering. Planning now should consider splitting or revaluing assets before April 6, 2026.
- Transferability of relief between spouses lets couples pool allowances more effectively.
Private Equity and Fund Managers
- Carried interest recipients will see heavier tax exposure since income tax (often higher than CGT) may apply fully under new regime. Funds should revisit fund agreements and forecast after-tax carry.
- Funds approaching realization events should assess timing relative to enactment date.
Actionable Steps
- Review your asset mix before April 6, 2026: consider selling or restructuring assets to benefit from full relief under the old rules.
- Trusts and ownership structures: trusts often complicate transferability between spouses – ensure beneficiaries’ designations are aligned.
- Amend fund legal docs and carry agreements to reflect income tax regime for carried interest: define what’s income vs capital gain.
- Tax projections: model between current CGT treatment vs new rate; understand cash flow impacts for payments that were previously deferred or taxed lightly.
FAQs
- Will past transactions be affected? No, changes are prospective from 6 April 2026; previous disposals retain old rules. (gov.uk)
- Does the relief pairing apply to civil partners and spouses? Yes, the £1M full relief allowance becomes transferable between them. (gov.uk)
These reforms mark some of the largest tax shifts for wealth, property, and investment income in recent UK budgets. Proactive planning can mitigate surprises when the changes take hold in April 2026.