Inheritance tax is once again attracting attention ahead of the Autumn Budget, with renewed discussion among advisers and commentators about the future of the current regime.
One idea receiving attention is whether the existing inheritance tax (IHT) system could eventually be replaced by a lower flat-rate levy on estates, with a figure of 10% featuring in some of the debate. At present, however, this remains speculation rather than announced government policy, and there is no certainty that such a proposal will form part of the Budget.
What is certain is that the taxation of inherited wealth is already changing. Specialists from across Kinbrook Group, including Duncan & Toplis Legal Services and Castlegate Financial Management, say this makes it a sensible time for individuals, families and business owners to consider how their existing estate and succession plans could be affected – rather than waiting for further change before reviewing them.
The standard rate of IHT remains 40%, generally applying to the part of an estate above the available tax-free thresholds after relevant exemptions and reliefs have been taken into account. The standard nil-rate band remains £325,000.
There have, however, already been important changes affecting business and agricultural assets.
From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief is limited to a combined £2.5 million of qualifying property for an individual. Qualifying value above the available allowance generally receives relief at 50%. Unused allowance can also be transferred between spouses and civil partners, subject to the relevant conditions.
A further significant change arrives on 6 April 2027, when most unused pension funds and pension death benefits will be brought within the value of an individual's estate for IHT purposes.
Taken together, these changes mean estate planning increasingly needs to consider pensions, businesses, property, investments and legal arrangements as parts of the same overall picture.
Nicholas Smith, Head of Tax at Duncan & Toplis, part of Kinbrook Group, said: “The amount of speculation around inheritance tax can make it tempting to act before the position is clear. For most people, the more useful first step is to understand their current exposure and how the changes already confirmed could affect their estate.
“For business owners and families with significant assets in particular, that means looking at the estate as a whole and considering how existing reliefs, ownership arrangements and succession plans work together.”
Significant financial or legal decisions should not be made purely in response to speculation.
However, debate about further reform can provide a useful prompt to ask a different question: if the rules changed, would your existing arrangements still achieve what you want them to?
For some families, an estate plan may have been put in place many years ago and not revisited as asset values, family circumstances or legislation have changed.
Business owners face another layer of complexity. The value of a business may represent a substantial proportion of family wealth, while succession plans may depend on particular tax reliefs continuing to operate as expected.
The appropriate response is therefore not necessarily to change anything now. It is to understand your current position and identify where future changes could have an impact.
A Will should reflect current family circumstances, assets and intentions. A review can also help identify whether existing Will provisions remain tax-efficient in light of changes to legislation and family circumstances. It is also worth considering if existing Letters of Wishes remain appropriate and how changes to the tax treatment of different assets could affect the intended distribution of an estate.
Duncan & Toplis Legal Services is happy to have an informal conversation with anyone who would like to discuss whether their existing Will still reflects their wishes and circumstances.
Estate planning is also a good opportunity to review Lasting Powers of Attorney (LPAs), or consider putting them in place if they do not already exist.
LPAs allow individuals to appoint people they trust to make decisions on their behalf if they are unable to do so in the future. Reviewing these arrangements alongside a Will can help make sure they continue to reflect an individual's circumstances and wishes.
Gifting during someone's lifetime can form part of an estate-planning strategy, and, in some circumstances, can reduce inheritance tax exposure if the donor survives for the required period following the gift.
Regular gifts made from surplus income can also be exempt from IHT where the relevant conditions are met, making gifts out of excess income another area worth discussing as part of a wider estate-planning review.
However, the tax consequences, timing and individual's own future financial needs all require careful consideration. Gifting should not be driven by a desire to respond quickly to Budget speculation.
Existing trusts may warrant review to establish if they continue to meet the purpose for which they were established. For those considering creating new trusts, the legal, tax and practical implications should be considered together.
For business owners, succession planning should extend beyond the question of who will eventually own the business. It should consider management, control, family expectations, funding and the tax position.
The changes to Business Property Relief make it particularly important to understand what qualifies for relief, the value of qualifying assets and how that fits within the wider estate.
Similar considerations apply to farming families and landowners following the changes to Agricultural Property Relief. Existing succession plans may have been developed under a different set of assumptions and could therefore warrant review.
The changes taking effect from April 2027 mean pensions will become increasingly relevant to estate planning.
For some families, bringing most unused pension funds and death benefits within the estate for IHT purposes could change the overall value exposed to tax. It may also affect how pensions interact with other investments, gifting plans, Wills and longer-term financial arrangements.
Peter Wilson of Castlegate Financial Management, part of Kinbrook Group, said: “The changes to the inheritance tax treatment of pensions from April 2027 mean pensions will need to form a much more prominent part of estate-planning conversations.
“For some families, arrangements that made sense when pensions generally sat outside the estate may need to be reconsidered alongside other investments, gifting plans and the assets they ultimately want to pass to the next generation.”
Family Investment Companies and other ownership structures can have a role in longer-term family wealth planning in appropriate circumstances.
However, establishing or changing a structure should be based on the family's objectives, assets and circumstances, taking account of the tax and legal consequences, rather than simply responding to possible changes in tax policy.
Property ownership arrangements may warrant similar consideration, particularly where substantial property assets form part of wider family wealth.
Estate and succession planning can involve a number of interconnected issues. A decision made for tax purposes can have implications for Wills and ownership structures, while changes affecting pensions or businesses can alter the wider financial and succession plan.
This is where the breadth of expertise across Kinbrook Group can be particularly valuable. Tax specialists at Beavis Morgan and the Group's other accountancy businesses can work alongside Duncan & Toplis Legal Services and wealth management specialists at Castlegate Financial Management to consider the different aspects of a client's position together.
Amy Codd of Duncan & Toplis Legal Services, part of Kinbrook Group, said: “Good estate planning is rarely about one tax or one document. A change in the treatment of a pension, business or other asset can have consequences for a Will, succession arrangements and the wider family plan.
“The current discussion is a useful prompt to review those arrangements, but significant decisions should be based on an individual's circumstances and confirmed legislation rather than speculation about what may be announced.”
Until the Chancellor delivers the Autumn Budget, discussion about further inheritance tax reform remains speculation.
Trying to restructure an estate around an unconfirmed proposal risks responding to a change that may never happen - and could have unintended tax, legal or financial consequences.
A more useful approach is to use the current debate as an opportunity to review existing arrangements.
Are your Will, Lasting Powers of Attorney and succession plans current? Do you understand how changes to Business and Agricultural Property Relief affect you? Have you considered the April 2027 pension changes? Do your trusts, ownership structures and wider arrangements still reflect what you want to achieve for your family?
By bringing together Tax, Legal and Wealth expertise from across Kinbrook Group, clients can consider these questions as part of the same conversation and be better prepared to respond once the details of any further reforms are known. For advice and assistance, get in touch or contact your usual Duncan & Toplis adviser.
