Upcoming Inheritance Tax changes that could affect you

Upcoming changes to Inheritance Tax (IHT) will be phased in over the next two years.

With property values rising and the IHT nil-rate thresholds remaining frozen until 2030, more estates will face unexpected tax bills if they fail to plan accordingly.

While two years may seem like plenty of time to prepare, effective estate planning requires careful consideration and proactive action sooner rather than later.

• From April 2025 – A new residence-based system will replace the existing domicile regime. This change means that individuals who have lived in the UK for at least 10 of the last 20 years will be liable for IHT on their worldwide assets. Non-UK residents may still face IHT liabilities for up to 10 years after leaving the country.
• From April 2026 – Agricultural and Business Property Relief (APR and BPR) will be capped. From this date, 100 per cent relief will only apply to the first £1 million of eligible assets in an individual’s estate. Anything above this threshold will incur an IHT charge of 20 per cent. This change will have significant implications for family-run businesses and farming families.
• From April 2027 – Unspent pension funds, previously exempt from IHT, will become taxable. Inherited pension pots will be included in estate calculations, potentially pushing more families over the threshold, particularly as they remain frozen.

If you are unsure whether these changes will impact your estate planning, seek professional advice to help mitigate potential IHT liabilities and ensure your family assets remain protected.

Our experienced team can help you review your assets and pension arrangements, explore practical gifting options, and consider trust structures that suit your family’s needs.

Contact our team today for assistance minimising your IHT liabilities.