Inheritance Tax Changes Prompt Wealthy Families to Revise Estate Plans
LONDON – High net worth individuals and families are accelerating estate and gifting plans amid growing expectations of significant changes to UK inheritance tax (IHT) in the upcoming Autumn Budget, expected in late November. The potential overhaul includes extending the levy to encompass pension pots and revisiting existing gifting rules, sparking a flurry of activity amongst financial advisors and their clients.
Currently, gifts made seven or more years before a person’s death are exempt from the 40% IHT rate. Gifts made between three and seven years prior are subject to tax on a sliding scale, known as ‘taper relief’, ranging from 8% to 32%. though, ministers are anticipated to bring pensions into the scope of IHT starting in April 2027, taxing unused pension pots and death benefits at the standard IHT rate.
“Clients are understandably keen to get ahead of any potential changes, particularly around inheritance tax, gifting, and retirement planning,” said Simon Bashorun, head of advice at Rathbones Private Office. He noted the speculation is creating “a prolonged period…a bane to financial planning” for his clients.
The anticipated changes follow a previous attempt by the Treasury to reform the wealth levy – dubbed the ‘family farm tax’ – which aimed to remove exemptions enjoyed by owners of farmland and family businesses through Agricultural Property Relief and Business Asset Disposal Relief. This earlier proposal triggered widespread protests.
Bashorun added that clients with substantial pension pots – specifically those exceeding seven figures – are “reassessing their long-term plans and asking whether they should act before the Autumn Budget.”
