Inheritance tax is attracting renewed attention ahead of the Autumn Budget, including discussion about whether the current system could one day be replaced by a lower flat-rate levy on estates. A figure of 10% has featured in that debate, but it remains speculation rather than announced government policy. In my view, the sensible response is not to restructure an estate around an unconfirmed proposal. It is to check whether the legal arrangements already in place still reflect your wishes, circumstances and succession plans.
The standard inheritance tax (IHT) rate remains 40%, generally applying to the part of an estate above the available tax-free thresholds after relevant exemptions and reliefs. The standard nil-rate band remains £325,000. Alongside that position, confirmed changes affect how business, agricultural and pension assets need to be considered within estate planning.
These changes make it increasingly important to consider wills, powers of attorney, trusts, ownership arrangements, pensions and business succession as connected parts of the same plan.
I would begin by checking whether your will reflects your current family circumstances, assets and intentions. A review can identify whether its provisions remain appropriate and tax-efficient in light of legislative or personal changes. Any letter of wishes should also be considered: a change in the tax treatment of a pension, business or other asset could affect how the intended distribution of the estate works in practice.
Estate planning is also an opportunity to review any Lasting Powers of Attorney (LPAs), or to consider putting them in place if they do not already exist. LPAs allow you to appoint people you trust to make decisions on your behalf if you are unable to do so in future. Reviewing them alongside your will helps ensure that both documents continue to reflect your circumstances and wishes.
Lifetime gifting can form part of an estate planning strategy and, in some circumstances, reduce IHT exposure if the donor survives for the required period after making the gift. Regular gifts from surplus income can also be exempt where the relevant conditions are met. However, the tax consequences, timing and the donor’s own future financial needs all require careful consideration. Gifting should not be driven by a desire to react quickly to Budget speculation.
An existing trust should be reviewed to establish whether it still serves the purpose for which it was created. If a new trust, Family Investment Company or other ownership structure is being considered, its legal, tax and practical implications should be assessed together and against the family’s objectives, assets and circumstances. The same applies to property ownership arrangements where substantial property assets form part of wider family wealth.
The changes taking effect from April 2027 mean pensions will become more prominent in estate planning. For some families, bringing most unused pension funds and death benefits within the estate for IHT purposes could change the value exposed to tax. It may also alter how pensions interact with investments, gifting plans, Wills and longer-term financial arrangements.
Peter Wilson, Castlegate Financial Management, adds: “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.”
Until the Chancellor delivers the Autumn Budget, further reform remains uncertain. Significant decisions should be based on an individual’s circumstances and confirmed legislation, not on speculation about what may be announced.
I recommend using the current discussion as a prompt to ask whether:
Good estate planning is rarely about one tax or one document. Legal, tax and wealth considerations need to be looked at together so that a change affecting one asset does not undermine the wider plan.
As I highlight in the video below, preparation rather than panic should be the focus. With key changes to inheritance tax reliefs and pension treatment approaching, now is the time to ensure your will, pension nominations, powers of attorney and wider estate planning arrangements work together effectively. Taking advice early can provide clarity, protect your wishes and give you confidence that your assets will pass to the right people in the most appropriate way.
If you would like to discuss whether your current arrangements still reflect your wishes and circumstances, please get in touch.
