05
Nov
Inheritance tax is shifting again – and you can’t afford to ignore it
Sponsored article by S&W.
All change for Inheritance Tax (IHT)
Sometimes it seems inheritance tax (IHT) is unpopular with everyone apart from the government. Polls show most of the British public think the tax is unfair. A recent survey suggested a majority wanted it abolished.
That’s one thing we probably can say for certain isn’t going to be in the Autumn Budget, though.
Despite its unpopularity with the public, IHT has a fascination for the Chancellor. The last Budget announced proposals for a raft of changes, and as we approach the next one, we might not have seen the last.
Even without new rules, IHT’s impact is growing as increasing asset values and previous Budgets’ repeated freezes to thresholds draw more estates into it. Inheritance tax receipts hit a record £8.2 billion last tax year and, whatever the Chancellor does in November, they’re likely to rise in future.
APR, BPR and pensions
IHT was a key issue raised by clients and the team at the recent capital taxes update at S&W’s new office at Copthall Bridge. We had plenty to discuss:
- The reductions in agricultural property relief (APR) from April 2026
- The cuts to business property relief on the same date
- The inclusion of pensions for inheritance from April 2027
Much has already been said about the APR cut, but even now, the issue remains up in the air. The NFU and others continue to lobby against it. Thinktank the Centre for the Analysis of Taxation (CenTax) suggests instead allowing full relief up to £5 million per person (£10m for a couple) and 50% relief from £5m to £10m, as long as farmland or business assets constitute at least 60% of an estate. Over £10m, there would be no relief.
CenTax says this would spare more family farms while increasing tax revenue, but it remains to be seen if the government will take the advice on board.
Less has been said about BPR, but it could prove a more silent killer of estates’ values – and potentially business fortunes. Our new Business Owners Sentiment Survey shows many business owners are considering reducing headcounts to put aside funds from the business to pay a higher IHT bill.
Partner, Ryan Harrison
A growing need for advice
However, family farms and businesses intend to tackle the changes, time is running out. There is still time in certain situations to take action before the April deadline that can have a significant impact on IHT. But the window is closing.
That’s true even with the change around. While pensions won’t be included in estates until April 2027, decisions now will influence the value of those pensions in estates. Individuals with big pots or generous defined benefit schemes could see their estates subject to a large IHT charge.
Of course, more changes may still be to come, with significant speculation surrounding gifts and the seven-year rule. There’s little value in second-guessing what the Chancellor may do. But it is vital to recognise the increasing complexity of IHT rules, the deadlines fast approaching, and the growing importance of sound advice.
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