The Budget on the horizon: key considerations for legacy teams

It's that time again. The Autumn budget is on 28 October 2026. It will be the first budget since Andy Burnham became our new Prime Minister, and John Healey our new Chancellor of the Exchequer. As always, the media is alive with speculation about changes that "might" be made. It's best not to read too much into the speculation, as sensationalism drives clicks, and the truth is that no one outside of government can know precisely what's going to happen until the Chancellor makes the announcements on the day. But it is nevertheless interesting to see what is being reported. The budget, of course, covers the full extent of the country's finances, and much of the content may well be relevant to our personal lives. However, in the charity legacy sector, the focus will as ever be on any potential changes to the "big 3" taxes, i.e. inheritance tax, capital gains tax, and income tax, particularly as they impact estates.

Inheritance Tax (IHT)

Legacy teams are still very much in the throes of getting to grips with the changes announced in the Autumn Budget two years ago, i.e. bringing pensions within the ambit of IHT. Those changes come into effect in April 2027, and please do keep an eye out for the special edition of our "Lunch & Learn" series in association with the Institute of Legacy Management. It's expected to be scheduled in early 2027, and we'll be exploring in detail the pension changes and the potential impacts they'll have on the charity legacy sector. Significant changes to agricultural and business reliefs are of course in relatively recent memory too, having come into effect on 6 April 2026.  

It's possible that the upcoming budget could bring about even more changes to IHT, although, so far, the media speculation hasn’t been quite what it normally is this close to a budget. The Prime Minister has previously spoken about significant reforms to IHT, possibly even replacing it with a social care levy under which all estates would be taxed at 10% regardless of value. It's perhaps unlikely that such an enormous change will be made without the government first setting out the plan for the public in more detail. It's not out of the question that it could feature in the announcements though.  A key question for those reading this article will of course be whether charities would be exempt from the levy, as they are from IHT. It is far too early to say, not least because it may never happen. 

Capital Gains Tax (CGT)   

The main speculation on CGT has been around the rates, and in particular whether they should be increased to be more in line with the rates of income tax. As with IHT, charities enjoy exemption from CGT, and there has been no suggestion at all that this will change regardless of what the rates are. But legacy teams will nevertheless be interested in any changes to the rates. Opportunities to mitigate CGT via the well-established route of appropriation are sometimes missed, which comes at a cost to charities' legacy income. The higher the rates, the more damaging those missed opportunities will be. 

The abolition of the tax-free uplift on death is also finding its way into some press articles. This would dramatically increase the amount of CGT paid through estates, as gains on the disposal of assets would be calculated not against the date of death value (as now), but against the acquisition value, which could mean years, if not decades, of capital growth being taxed. It may be comforting to know – without wishing to tempt fate – that this particular idea has been in amongst the speculation for the last several budgets, and has never found its way into the announcements.     

If we do see CGT rates hitting 45% or more, or even, heaven forbid, the removal of tax-free uplift on death, then the helpful guidance and reminders that many charities already provide to personal representatives around appropriation are going to become more important than ever, as the losses from missed opportunities to mitigate CGT could be enormous.

Income Tax

Our new Prime Minister and Chancellor remain bound by their government's manifesto commitments in relation to taxing working people, so income tax is perhaps the least likely of the "big 3" to see material changes in the budget. Whilst they are only bound politically, and not in law, it would nevertheless be borderline impossible for them to increase the rates of income tax (or, at least, not without suffering serious political consequences). If there are to be changes, they will more likely relate to the thresholds, which are of little consequence in the charity legacy context given that they only apply to the living. 

We are sure that, like us, you will be paying close attention to the budget announcements on 28 October and, as ever, please be assured that we will provide insights and updates on any changes relevant to the charity legacy sector.