Many of us have thought about safeguarding our estate and have been planning ways to best minimise inheritance liabilities for our family and loved ones.
Whether that includes monetary gifts, transferring property during our lifetime, setting up trusts, or using tax-free allowances. Some people have also made use of special tax breaks for things like family businesses or farms, and made sure assets were shared between spouses and relatives in the best way possible.
However, the recent changes that have been announced this year in relation to Inheritance Tax (IHT) appear to have already altered the way people are planning for the future.
In this article, we provide a breakdown of how recent changes could affect you and why it matters now more than ever to plan ahead.
Updates & Changes
- Agricultural and business reliefs capped – As of April 2026, full relief will only apply to the first £1 million of qualifying business or farming assets (50% relief thereafter).
- Pensions & IHT – From April 2027, most unused pension funds will be treated as part of your estate.
- Nil rate bands frozen until 2030 – The standard allowance of £325k remains frozen until 2030. However, as inflation rises, many estates may be subjected to more inheritance tax
- Inclusion of Trusts – Now, settlor-interested trusts are subjected to periodic IHT charges (up to 6% every 10 years) along with additional charges once funds are distributed
How are you impacted?
Steps to consider if you are affected by the above changes:
- Review your Will – It is important to review your will periodically and the structure of your estate, particularly in light of the recent changes.
- Reassess trusts and protections – Be aware of any periodic charge and exit penalties. The recent changes may affect any previously tax efficient trusts into tax liabilities.
- Lifetime gifting and cash flow – Any gifts that survive seven years after being made may avoid inheritance tax entirely.
- Charitable giving – Review any charitable legacies in your will as you may be able to reduce the effective tax rate to 36% all while supporting causes you care about.
- Life assurance – Life policies held in trust can help beneficiaries to pay any IHT due and avoid being forced to sell assets.
Help from the Backhouse experts
If you are looking for legal advice regarding Inheritance Tax Planning, speak to one of our experts to ensure your beneficiaries are protected and your estate planning adapts to this new IHT landscape. Contact the team using the information below:
Tel: 01245 893400
Email: info@backhouse-solicitors.co.uk
Visit: 17 Duke Street, Chelmsford, CM1 1JU
Or send us a message through the Contact Us page on this website.
