Amendments to inheritance tax (IHT) rules, announced in the Autumn 2024 Budget, are about to start biting.

IHT payments have been rising much faster than inflation in recent years. In the last decade IHT receipts rose by over 115% and are projected to increase by another 75% over the next six years.

The Autumn 2024 Budget helped IHT revenues further along their upward course by introducing two important reforms:

• Business and agricultural reliefs For 2025/26 these reliefs are at a rate of 50% or 100%, with no limit. From 2026/27, the 100% relief will be capped at a combined £2.5 million per individual, with any unused amount transferable to a surviving spouse or civil partner.
• Pension death benefits At present, pension death benefits are normally excluded from your estate for IHT purposes. From 6 April 2027 that is due to change, and most pension death benefits will fall within the scope of IHT.

Of these two changes, the reduction in agricultural relief has attracted by far the most attention. However, in practice the changes to reliefs will be much less significant than the inclusion of pensions in the IHT net. Even before the yuletide climb down, the relief reforms were projected to raise little more than a third of the revenue of the pension change.

In addition, including pension values into estates will, for some homeowners, mean that their residence nil rate band is reduced or completely extinguished due to the effect of tapering.

The cumulative effect of the extended nil rate band freezes and Autumn 2024 Budget reforms means that any estate planning should now be reviewed. If you have no estate planning at present, the pension change could be a reason to start. Estate planning requires expert advice, as in some instances it may be necessary to restructure other aspects of your financial planning, such as retirement provision.