The second Autumn Budget delivered by the Labour government on 26th November contained few surprises, not least because the details had been leaked in the days before the announcement.
Since taking office, the government has made no secret of its policy that “those with the broadest shoulders should bear the highest burden”. This means, of course, that those considered by this government to be “wealthy” shall be expected to pay more taxes to shore up the yawning gap in the public finances.
Whilst undoubtedly the choices faced by the Chancellor were difficult, her economic policies will be unwelcome to many who have worked hard throughout their lives to build up their wealth and wish to pass their assets on to their loved ones.
How Will The 2025 Autumn Budget Affect Estate Planning?
By remaining largely silent on the subject of Inheritance Tax (IHT), the Chancellor has in effect confirmed that reforms introduced in the 2024 Autumn Budget will take effect. As has been widely reported over the past year, these changes shall affect families, trustees, farm and business owners, as well as those with varied investment portfolios. This makes proactive estate planning more important than ever.
2026: What’s Changing?
- IHT Reliefs on Business and Agricultural Property: From 6th April 2026, the total reliefs on business and agricultural property shall be capped at the value of £1m. Any value above £1m may only qualify for 50% relief. This means that those who own businesses or farms, or those whose investment portfolios include business and agricultural assets, shall pay more tax on death.
The Chancellor did clarify on 26th November that the business and agricultural relief allowance will be allowed to be transferred between spouses and civil partners. This will come as a relief to many, who were previously worried that this change could further complicate IHT planning.
- Frozen Allowances: The standard IHT nil rate bands (£325,000 basic and £175,000 residence allowance per person) shall remain frozen until 2030, meaning that as properties and well-managed investments increase in value, more estates will be caught in the IHT net.
- Capital Gains Tax: Rates on certain business disposals shall increase from April 2026.
2027: What’s Changing?
- Taxation of Pensions: From 6th April 2027, unused pension pots shall count towards the value of an estate for IHT purposes.
What Has Not Changed?
Despite rumours surrounding the introduction of a lifetime gift limit or the extension of the seven-year rule (this is the rule that you must survive the date of a gift by seven years in order for that gift to fall outside your estate for IHT purposes), no further reforms were announced by the Chancellor in this recent Budget.
This is, perhaps, not surprising because the measures announced last year have proved highly unpopular and have resulted in widespread protests, most notably by farmers and agricultural landowners.
Why Does This Matter?
If you own a business, a farm or have investments, these changes could increase your exposure to IHT and make the administration of trusts and estates more complicated. Acting early can reduce the impact.
What Can You Do?
- Review your Will and trust arrangements: Make sure they reflect the new rules and are as tax-efficient as possible.
- Consider gifting assets during your lifetime: Starting the seven-year clock sooner could save tax later.
- Review your business assets: Check that they still qualify for relief.
- Retain a pot of cash: Ensure that funds are readily accessible to cover future tax bills.
Act now
Our friendly and expert team at Slater Heelis can provide you with tailored advice to navigate these changes and protect your hard-earned wealth from the tax office.
Get In Touch
Paul Baker is an Associate in our expert Wills & Probate team.
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