With inheritance tax once again under scrutiny ahead of the Autumn Budget, I believe now is a sensible time for individuals, families and business owners to review their estate and succession plans.
Inheritance tax is rarely far from the headlines, and the latest debate may leave people wondering whether they should act now. One idea attracting attention is the possible replacement of the current inheritance tax (IHT) system with a lower flat-rate levy on estates, with a figure of 10% featuring in some commentary. At present, this is speculation rather than announced government policy, and there is no certainty that it will form part of the Budget.
My advice is not to make significant financial or legal decisions in response to an unconfirmed proposal. Instead, use the discussion as a prompt to understand your current position. The taxation of inherited wealth is already changing, and confirmed reforms may affect plans that were designed under a different set of assumptions.
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. However, important changes affecting business and agricultural assets are already due to take effect.
From 6 April 2026, 100% Agricultural Property Relief and Business Property Relief will be limited to a combined £2.5 million of qualifying property for an individual. Qualifying value above the available allowance will generally receive 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 reforms mean estate planning increasingly needs to consider pensions, businesses, property, investments and legal arrangements as parts of one overall picture.
For me, the key question is not simply whether the rules might change. It is whether your existing arrangements would still achieve what you want them to if they did. An estate plan may have been put in place years ago and not revisited as asset values, family circumstances or legislation changed. Before taking action, it is important to understand the estate as a whole and how the available reliefs, ownership arrangements and succession plans work together.
Existing trusts may warrant review to establish whether they still meet the purpose for which they were created. If a family is considering a new trust, the legal, tax and practical implications should be considered together. The same principle applies to Family Investment Companies and other ownership structures: they can play a role in longer-term family wealth planning in appropriate circumstances, but the decision should be based on the family’s objectives, assets and circumstances rather than a possible change in policy. Property ownership arrangements may also merit review where substantial property assets form part of wider family wealth.
Business owners face an additional layer of complexity because the value of the business may represent a substantial share of family wealth. Succession planning should therefore extend beyond who will eventually own the business. It should also address management, control, family expectations, funding and tax. The changes to Business Property Relief make it particularly important to understand what qualifies, the value of the qualifying assets and how these fit 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 different assumptions, so reviewing them now can help identify where the confirmed rules could create an impact.
From April 2027, pensions will need to form a much more prominent part of estate-planning conversations. For some families, bringing most unused pension funds and death benefits within the estate for IHT purposes could increase the value exposed to tax. It may also affect how pensions interact with other investments, gifting plans, Wills and longer-term financial arrangements.
Peter Wilson, Castlegate Financial Management, commented: “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.”
Estate and succession planning involves interconnected decisions. A step taken for tax purposes can have consequences for Wills and ownership structures, while changes affecting pensions or businesses can alter the wider financial and succession plan. That is why joined-up advice matters.
Amy Codd, Head of Legal Services, agreed: “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 IHT reform remains speculation. Restructuring an estate around an unconfirmed proposal risks responding to a change that may never happen and could produce unintended tax, legal or financial consequences.
I believe the more useful approach is to review what you already have: understand your exposure, check that your arrangements still reflect your wishes and identify where the confirmed changes may have an effect. By bringing together tax, legal and wealth expertise from across the Group, we can consider these questions as part of the same conversation and help clients prepare to respond when the details of any further reforms are known.
The potential inclusion of pensions within the inheritance tax regime has prompted many individuals to reconsider their long-term financial and estate planning arrangements. As explored in the video below by Tax Director Graeme Hills, understanding how these proposals could affect your circumstances is an important first step. Taking a proactive approach and regularly reviewing both your financial and legal plans can help ensure they continue to reflect your wishes and remain effective in an evolving tax landscape.
If you would like advice or assistance in reviewing your estate or succession plans, please contact our team.
