The October Budget could mean a radical rethink in your estate planning.

Changes to inheritance tax (IHT) coming over the next three years, outlined in our feature article on the Autumn Budget, could mean that a review of your estate planning is required. There are two main areas that need to be examined.

Pensions

If part of your estate planning involves pension benefits paid on death, then the new rules from 2027/28 could significantly increase the IHT liability on your estate. This applies both to traditional death in service life cover provided by your employer and to residual pension funds, unused at the date of death.

Pensions become subject to IHT, also increasing the overall value of the estate, which may lead to a loss of some or all of the residence nil-rate band.

What can be done to mitigate the extra IHT liability depends upon a variety of factors, not least of which is where you are on the retirement journey.

Business and agricultural reliefs

If you own shares in a private business, a partnership interest or agricultural land, the £1 million overall cap on 100% IHT relief means you can no longer assume these will pass to your beneficiaries free of IHT if you die after 5 April 2026. Relief of 50% will be available above the cap and the IHT can be paid over
ten years in interest-free instalments.

In theory, a married couple or civil partners can transfer business assets and/or agricultural land worth £2 million before IHT bites, but as the £1 million limit is not transferable, each partner would need to make their own bequest. It could be necessary to restructure ownership and revise wills before 6 April 2026 arrives. As with pensions, any approach must be tailored to your personal circumstances and financial goals.