Autumn 2025 Budget: Potential changes

Chancellor Rachel Reeves’ Autumn Budget, set for 26 November 2025, signals a decisive shift toward “tough but fair” fiscal policy aimed at restoring economic stability, reducing inflation, and creating conditions for interest rate cuts. Individuals should prepare for sweeping reforms across tax, property, family, and employment law. Although there is just over a week before the Budget there may be some changes that could still be made to protect against changes.

1. Trust and Tax Law: Wealth-Based Taxation on the Horizon
   Inheritance Tax (IHT) Reform

• Lifetime Gifting Cap: A £100,000 cap on lifetime gifts before IHT applies is proposed.
• Extended 10-Year Rule: The current 7-year rule for taper relief may be extended to 10 years.
• Taper Relief Removal: The government is considering eliminating taper relief entirely.
• Agricultural Property Relief: Revised proposals suggest a £5 million threshold, with assets above that potentially taxed at the full 40% rate.

Trusts and LLPs

• Trusts: New trusts may face stricter IHT rules and enhanced reporting obligations.
• LLPs: A new levy on Limited Liability Partnerships is under consideration, potentially impacting professional service structures.

Wealth and Exit Taxes

• Wealth Tax: A 2% annual levy on assets exceeding £10 million is under discussion, though concerns about capital flight persist.
• Exit Tax: A 20% tax on unrealized gains for wealthy individuals relocating abroad is being considered to prevent CGT avoidance.

Key Takeaway: Estate and trust planning strategies should be reviewed urgently. Clients considering gifts, trust formations, or relocation should act before the Budget is enacted.

2. Property Law: Structural Tax Overhaul
   Stamp Duty & Property Taxation

• SDLT Reform: Stamp Duty Land Tax may be replaced with a seller-based property tax.
• Council Tax Overhaul: A new local property tax based on updated valuations could replace council tax.
• Mansion Tax: An annual levy on high-value homes remains under active consideration.

Capital Gains Tax (CGT)

• Rate Alignment: CGT may be aligned with income tax rates, increasing liabilities for higher earners.
• Primary Residence Relief: Relief on the sale of high-value primary residences may be capped or removed, potentially triggering a 24% CGT on gains for higher-rate taxpayers.

Key Takeaway: Property transactions and ownership structures should be reviewed. Timing will be critical to mitigate potential tax increases.

3. Family Law: Pensions and Benefits in the Spotlight
   Pensions

• Tax Relief Cap: Pension tax relief may be capped at 30%.
• Inheritance of Pension Pots: From 2027, unused pension pots could become subject to IHT.

Child Benefit Reform

• Two-Child Cap: Changes to the cap and tapering of benefits are expected.

Key Takeaway: Divorce settlements and succession planning must account for pension and benefit reforms.

4. Employment Law: Rising Costs and Rights
   Payroll Taxes

• Lower Thresholds: A reduced threshold for NI liability is under review.

Worker Protections

• Flexible Work Rights: The Employment Rights Bill is expected to expand flexible working entitlements and protections.

 Key Takeaway: Employers should prepare for increased payroll costs and enhanced compliance obligations.

5. Income Tax: Subtle Increases Through Fiscal Drag

• Threshold Freeze: The freeze on personal and higher-rate income tax thresholds may extend to 2030, pulling more earners into higher tax bands—raising an estimated £8 billion.
• Rate Hike Rumours: While the government maintains it won’t raise headline rates, speculation persists about potential increases to meet fiscal targets.

Final Thoughts
The Autumn 2025 Budget is poised to reshape the UK’s fiscal landscape. With a focus on wealth redistribution, property reform, and increased employer obligations. The window for tax-efficient planning may be closing fast.

The One Big, Beautiful Bill Act of 2025 (OBBBA), signed into law on July 3, 2025, introduces sweeping changes to U.S. international tax rules. These updates aim to modernize cross-border taxation, enhance competitiveness, and provide clarity for multinational corporations. Below are the most significant provisions.

1. GILTI Gets a New Identity

The familiar Global Intangible Low-Taxed Income (GILTI) regime has been rebranded as Net CFTC Tested Income (NCTI). While the name changes, the mechanics remain broadly similar, with notable adjustments:

• Section 250 deduction reduced to 40%, resulting in an effective top rate of about 14% after foreign tax credits.
• Foreign tax credit (FTC) under Section 960 increased from 80% to 90%, easing the burden for U.S. shareholders of foreign corporations.

2. FDII Transforms into FDDEI

Foreign-Derived Intangible Income (FDII) is now Foreign-Derived Deduction Eligible Income (FDDEI). Key changes include:

• Section 250 deduction for FDDEI lowered to 33.34%, aligning its effective tax rate with NCTI at approximately 14%.
• This shift underscores OBBBA’s intent to harmonize treatment of export-related income and intangible assets.

3. Look-Through Rule Made Permanent

The Section 954(c)(6) look-through rule which was previously temporary is now permanent. This ensures that certain payments between related Controlled Foreign Corporations (CFCs) are not classified as passive income, reducing unexpected U.S. tax exposure and giving multinationals with complex structures long-term certainty.

4. BEAT Adjustments

The Base Erosion and Anti-Abuse Tax (BEAT)has included incremental changes:

• Rate increases from 10% to 10.5%.
• New exception for transactions involving countries with corporate tax rates of 18.9% or higher, mitigating double-taxation concerns.

5. Downward Attribution Repealed

OBBBA reinstates Section 958(b)(4), reversing a TCJA-era change. This prevents foreign corporations from being automatically attributed to U.S. entities, thereby reducing unnecessary CFC classifications and compliance burdens.

6. Other Noteworthy Provisions

• New Section 951B: introduces a regime for “Foreign Controlled U.S. Shareholders.”
• Section 863(b): updates sourcing rules for goods produced in the U.S. but sold abroad through foreign offices.
• Permanent look-through exception under Section 954(c)(6)(C).
• Section 960(d)(1): raises deemed-paid FTC for Subpart F income from 80% to 90%.

Effective Date: These changes apply to tax years beginning after December 31, 2025.

Why it matters

For U.S. multinationals, OBBBA’s international tax provisions represent a mix of opportunities and challenges. While higher foreign tax credits and permanent look-through rules offer relief, reduced deductions and BEAT adjustments may increase overall tax costs. Strategic planning will be essential to optimise global tax positions under the new regime.

The U.S. Treasury and IRS have officially withdrawn controversial proposed regulations (REG–112261–24 and REG–116085–23) that would have imposed stricter requirements on tax-free spin-offs and restructurings. The decision follows widespread criticism from tax professionals and revokes related guidance (Notice 2024-38).

With the withdrawal, Revenue Procedure 2025-30 reinstates more flexible rules from earlier procedures (2017-52 and 2018-53), easing requirements for private letter rulings. Taxpayers should review their current ruling requests to ensure compliance with the updated framework.

The rollback restores greater flexibility in structuring tax-free separations, especially in areas like deal structure changes, post-separation arrangements, and liability assumptions. However, scrutiny remains on monetization transactions under I.R.C. § 361, including timing, adjustments, and basis limitations. Careful planning is still advised.

Congress has passed a short-term continuing resolution (CR) to fund the U.S. government through November 17, 2025, narrowly avoiding a shutdown. The CR maintains current funding levels and includes limited supplemental appropriations for disaster relief and support for federal firefighters.

While this measure temporarily averts disruption, the risk of a shutdown remains if lawmakers fail to reach a broader agreement before the new deadline. The House and Senate continue to negotiate FY 2026 appropriations, with several bills still pending.

Should a shutdown occur, federal agencies including the IRS would operate under contingency plans. These typically involve:

• Reduced staffing and limited services, especially in taxpayer assistance and enforcement.
• Delays in processing returns and issuing refunds, particularly for amended filings and correspondence.
• Suspension of non-essential operations, which may affect audits and compliance reviews.

The IRS has not yet released an updated contingency plan for FY 2026, but prior plans suggest that core functions like e-filing and automated systems would remain operational.

Planning Ahead

We recommend the following steps:

• Submit outstanding documentation early to avoid processing delays.
• Monitor IRS announcements for updates on service availability.
• Prepare for extended timelines on any pending matters, especially those involving correspondence or refund claims.

The UK’s tax landscape for non-UK domiciliary underwent a seismic shift on 6 April 2025, following the abolition of long-standing “trust protections” and significant changes to inheritance tax rules. These reforms, introduced after the Labour Budget of October 2024, have effectively removed the concept of domicile from the UK tax code, making the settlor’s status as a “non-dom” largely irrelevant.

As a result, many offshore trusts previously considered tax-efficient have lost their advantages.

Under the new regime, UK-resident settlors of offshore trusts are now exposed to income tax and capital gains tax on foreign income and gains where the trust is settlor-interested. The only exception applies to “qualifying new residents” within their first four years of UK residence.

Additionally, non-UK assets in such trusts are now subject to IHT if the settlor qualifies as a “long-term resident”, defined as someone resident in the UK for at least 10 of the previous 20 tax years. This exposure can persist for up to a decade after leaving the UK.

Despite these sweeping changes, experts argue that offshore trusts are far from obsolete. Trusts established by non-UK resident settlors for UK-based beneficiaries remain unaffected by the reforms, provided the settlor stays non-resident.

In such cases, the pre-2025 tax treatment continues to apply, making these structures viable for asset protection and succession planning, even if tax efficiency is diminished.

Other scenarios also preserve the utility of offshore trusts. For instance, if a UK-resident settlor and their spouse are irrevocably excluded from benefiting, income tax deferral can still be achieved.

Similarly, trusts can be structured to minimise chargeable gains or even leverage transparency for double tax treaty benefits, particularly for US persons managing cross-border obligations.

In some cases, “motive defences” may shield settlors from certain tax charges where the trust was created for non-UK tax reasons.

While the reforms have curtailed many traditional advantages, offshore trusts continue to offer strategic benefits in specific contexts. Advisors stress the importance of reviewing existing structures and considering alternatives, but for those prioritising asset protection, succession planning, or international tax alignment, reports of the demise of offshore trusts appear to have been greatly exaggerated.

Chancellor Rachel Reeves is expected to announce a new levy on individuals operating through limited liability partnerships (LLPs), including lawyers, family doctors and accountants, as part of efforts to plug a £30bn gap in the public finances.

Currently, partners in LLPs are classed as self-employed, meaning they are not subject to employer’s national insurance contributions (NICs), which stand at 15%, and pay a lower rate of employee NICs. Reeves is said to view this as an unfair advantage.

Under proposals developed by economists, a solicitor in a partnership earning the average of £316,000 would face an additional £23,000 charge. This is equivalent to an average tax rate of 7.3%.

Commenting on the idea, Arun Advani, director of CenTax, said: “Exempting partners from any equivalent to employer NICs is very regressive and simply means higher taxes for everyone else.”

Current Position and Key Changes

Currently, most death benefits from registered pension schemes are not regarded as part of the deceased’s estate for Inheritance Tax (IHT) purposes. However, an exception applies to non-discretionary death-in-service benefits, which are presently included in the estate for IHT assessment.

From April 2027, the IHT regulations will undergo significant changes. Most lump sum death benefits from both defined benefit (DB) and defined contribution (DC) pension schemes will be included in the deceased’s estate and subjected to IHT. Certain exceptions will remain, such as dependants’ scheme pensions (including those paid to a spouse or child), all death-in-service benefits (irrespective of whether they are discretionary), and potentially charity lump sum death benefits, although the draft legislation has not yet confirmed this final point.

IHT Reporting and Payment Responsibilities

Under the revised regulations, pension schemes will no longer bear the responsibility for paying Inheritance Tax (IHT). Responsibility for these payments will transfer to the deceased’s personal representatives (PRs), who are required to report the death benefits and settle any applicable IHT.

Beneficiaries receiving benefits valued at £4,000 or more may request the scheme to handle the IHT payment on their behalf. However, pension schemes are not mandated to provide this service for benefits below the specified threshold.

To facilitate a seamless process, new legal requirements will be introduced mandating that both personal representatives and pension schemes share relevant information. These obligations will be outlined in forthcoming draft regulations, which are anticipated to undergo a consultation process prior to finalisation.

Implications for Pension Schemes and Trustees

Although pension schemes will no longer be subject to Inheritance Tax (IHT) liability, they are required to update their administrative procedures and member communications by April 2027.

Trustees are advised to remain informed about the final regulatory guidance, particularly regarding information sharing protocols. It is recommended that schemes notify members of the IHT changes, encourage a review of their death benefit nominations, and provide clear information about which benefits may be subject to taxation.

Guidance for Employers

Employers are not obliged to take any action regarding death-in-service benefits, as these will remain fully exempt from Inheritance Tax under the new proposals. Consequently, employers may continue offering such benefits without any changes.

Overall

From April 2027, most lump sum death benefits from pensions will be subject to Inheritance Tax, with personal representatives responsible for reporting and settling the tax. Although this change exempts pension schemes from tax liability, it introduces new duties concerning communication and administrative requirements.

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The IRS reminded disaster victims in nine states that their 2024 tax filing and payment deadlines are automatically extended until May 1, 2025, and clarified that those seeking to electronically request an additional extension should submit requests by April 15, 2025. (IR 2025-41, 4/4/2025). The automatic May 1 extension is available to taxpayers in the states of Alabama, Florida, Georgia, North Carolina, and South Carolina.

Requesting further extension:

Though taxpayers in these nine states can request a tax filing extension between April 15 and May 1, 2025, the requests cannot be filed electronically after April 15, the IRS explained. Instead, extension requests made after April 15 must be filed only on paper using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.

The IRS also emphasized that requests for an extension beyond the May 1 deadline are not an extension of time to pay.

Relief for taxpayers in other disaster areas:

Taxpayers in other areas also eligible for automatic extensions, the IRS noted. This includes:

• California – Los Angeles County: These taxpayers have until October 15, 2025, to file 2024 returns and pay taxes due.
• Kentucky – all: These taxpayers have until November 3, 2025, to file 2024 returns and pay taxes due.
• West Virginia – Boone, Greenbrier, Lincoln, Logan, McDowell, Mercer, Mingo, Monroe, Raleigh, Summers, Wayne, and Wyoming counties: These taxpayers have until November 3, 2025, to file 2024 returns and pay taxes due.
• Israel terrorist attacks: Relief is available to taxpayers that live or have a business in Israel, Gaza, or the West Bank, and certain other taxpayers affected by attacks. These taxpayers generally have until September 30, 2025, to file and pay returns for taxes due between October 7, 2023, and September 30, 2025.

Please contact our team if you require further information.

Key Changes

• Foreign Earned Income Exclusion (FEIE): Increased to $130,000 (from $126,500 in 2024), allowing expats to exclude more foreign-earned income from U.S. taxation.
• Standard Deduction:
  • Single filers: $15,000
  • Married filing jointly: $30,000
  • Head of household: $22,500
• Retirement Contribution Limits:
  • 401(k) and 403(b): Increased to $23,500
  • IRA: Remains at $7,000

Income tax rates 2025

Filing Deadlines for Expats

• April 15, 2026: Deadline to pay any taxes owed.
• June 15, 2026: Automatic filing extension for expats.
• October 15, 2026: Extended deadline with Form 4868.
• December 15, 2026: Further extension possible with written request.

Note: Extensions to file do not extend the time to pay taxes owed.