Ministers are once again considering changes to Inheritance Tax (IHT).
Nothing has been set in stone, but a range of proposals is on the table.
Some of these proposals are already in motion, such as bringing pensions into the IHT net, while others are still undecided, like a revision of the rules on lifetime gifts.
Each change could materially alter your estate plan so now is a sensible moment to review your position and make considered adjustments rather than rushed decisions.
What concrete changes are already confirmed?
As noted, the biggest IHT change is regarding unused pensions.
From 6 April 2027, most unused pension funds and certain pension death benefits will be brought into a deceased person’s estate for IHT purposes.
Personal representatives will be responsible for reporting and paying any IHT due on those funds, which changes the tax treatment that many advisers previously assumed applied to pensions.
This measure is government policy and is set out in official guidance.
What further reforms are being discussed?
Beyond pensions, the Treasury’s discussions reportedly include a wider review of gifting rules and other reliefs as ministers look for additional revenue.
Press coverage and commentary suggest options under active consideration include tighter rules around trusts, the annual exemption, other small exemptions, potential caps on tax-free lifetime gifts, scraping the seven-year rule or extending the period such as ten years and changes to taper relief for gifts made within seven years of death.
None of these is confirmed yet, but the direction of travel is clear, so long-standing planning routes are under scrutiny.
How could these changes affect your estate planning?
Bringing pensions into the IHT net and any tightening of gifting rules changes the issue of who pays and when.
An estate that seemed comfortably below the IHT threshold can be pushed into charge by large pension pots or by revised treatment of recent gifts.
That means planning that relied on pensions remaining outside the estate or on generous taper relief may no longer deliver the expected outcome.
Professional commentary highlights that advisers and families are already revisiting plans in light of the pension announcement and the possibility of further reform.
To stay ahead of any potential changes, it is worth considering the structure of your estate now.
Start with a calm, comprehensive review before any reforms take effect to ensure you can make informed decisions ahead of any deadlines.
You should update your Will and compile a full inventory of assets, including pension entitlements and any trusts.
This will enable you to model the effect of the confirmed pension change from 6 April 2027 and stress-test your gifting strategy against scenarios where taper relief or gift allowances are tightened.
Where appropriate, consider whether drawing income, reallocating benefits, revising trust terms or accelerating carefully considered gifts makes sense but do so only after modelling the tax and practical consequences.
Above all, document your rational as a well-evidenced plan will stand up better if rules continue to shift.
IHT reform is politically sensitive, technically complex and still evolving.
That means the best response is practical planning informed by an expert team.
We are on hand to help you understand the changes and how they might uniquely impact your estate.
We can help you preserve control of your estate and protect what matters for the next generation.
To ensure you retain as much control of your financial future as possible, speak to our team today!
