Feeling like your estate planning has been thrown out the window since the October budget? You’re not alone.
In this blog, we’re going to look at the much-publicised changes to inheritance tax and what you can do to put yourself in a better position
Understanding the changes
Let’s cut through the complexity and get to the heart of what these changes mean for you and your family.
While the headline 40% inheritance tax rate remains unchanged, the devil is in the details – and these details could have substantial implications for your estate.
Key Changes You Should Know About
The nil rate band stays put
The standard inheritance tax-free threshold remains at £325,000 – a figure that hasn’t moved with inflation. What does this mean in real terms? As property values and assets continue to grow, more families are finding themselves potentially liable for inheritance tax.While this figure hasn’t changed, it actually means as time goes on, we’ll all be paying more inheritance tax as inflation continues to make things more expensive.
Proceed with caution for lifetime gifting
The seven-year rule for lifetime gifts hasn’t changed, but there’s a clear signal from the government that future changes might be on the horizon.Although no change might be seen as a positive sign, this isn’t the time to sit back and hope for the best. If you’re considering substantial gifts, now might be the moment to get strategic advice from financial and legal professionals.
Trusts are still a powerful planning tool
Trusts continue to be an effective way of managing inheritance tax, but the landscape is becoming more complex. With potential future regulations looming, it’s crucial to have a forward-thinking approach that anticipates potential changes.If you’re planning on making use of trusts in the near future, it’s best to get ahead of it and work with legal and financial professionals earlier rather than later.
Agricultural and business property relief
You may have seen our recent blog looking at Business and agricultural property relief as it relates to family businesses. This is a large change that puts a cap on the amount of business property that can be left tax free at £1m. Figures over this amount are now taxed at 20%.This affects many farms and family businesses and is going to have huge implications for estate and tax planning. The rules are complex and, you can read more about this in the blog form head of Gorvins family Business department, Christian Mancier.
Changes to pensions
Starting from April 2027, unused pension funds will be included in your estate for IHT purposes. This is a big change from the current system where pension funds and death benefits payable from a pension are generally exempt from inheritance tax.
What This Means for Your Estate Planning
The message from these changes is clear: proactive planning is more important than ever.
These changes are not just technical tweaks, they are quite large and sweeping in nature. At best you’ll need to speak to your legal and financial representative to help you navigate the changes. At worst, you’ll need to adopt a complete change in approach for your estate planning.
Practical Steps You Can Take Now
Review Your Will
One of the most obvious steps you can take is to review and update your will. Regular reviews ensure your estate plan remains tax-efficient and aligned with your current wishes, even as the government brings in new rules and policy changes.
Explore Gifting Strategies
With the help of a legal and financial representative, you can consider making smaller, regular gifts that can reduce your estate’s value while staying within annual exemptions. This requires careful planning but can be a powerful tool in navigating the changes.
Consider Trust Structures
Trusts remain a sophisticated tool for wealth transfer. But they’re not one-size-fits-all – you need expert guidance to structure them effectively. As always, a trustworthy and credentialed professional will be able to help you set this up.
Working with an expert
When thinking about estate planning, there are many traps that are all too easy to fall into. A skilled Wills Trusts and Probate solicitor will help you to avoid these pitfalls and ensure that you position yourself and your estate as sensibly as possible.
Our dedicated Wills Trust and Probate team at Gorvins are very experienced in helping clients plan for their future, ensuring their chosen beneficiaries can make the most of the assets they leave to them. Our expert lawyers are on hand to help you with your estate planning today.
The Bottom Line
Inheritance tax planning isn’t about avoiding tax – it’s about making informed decisions that protect your family’s financial well-being. The recent budget changes underscore the importance of professional, personalised advice.
If you’re looking for legal support with your inheritance tax matter, our wills, trusts and probate solicitors are available to take your call. Call us on 0161 930 5151, email us at enquiries@gorvins.com or fill in the online form.
Disclaimer: This blog provides general guidance and should not be treated as financial advice. Every estate is unique, and professional consultation is essential for tailored planning.