Inheritance Tax (IHT) decisions in the Autumn Budget will probably change financial arrangements for many families. 
 
Currently IHT affects about one in 20 or 4% of estates each year but by 2032 this is expected to increase to 7%. Parents might start passing on assets to their children much earlier to minimise IHT liabilities. 
Family homes form a large part of estates when people die, adding to Inheritance Tax liabilities.
Top considerations: 
IHT on family farms and businesses over £1million from 2026 
IHT on unused pension pots from 2027. 
 

Why the Budget matters 

Family homes. Parents and grandparents were encouraged to buy rather than rent their properties because they expected their value would increase. Many made this choice so they could leave assets to their children. However, family homes represent a large part of an estate, As property prices increase frozen thresholds mean IHT will affect more people. 
 
At the same time, children and grandchildren now find it hard to save a deposit and obtain a mortgage. As a result, assets will probably pass to members of the younger generation much sooner to help them buy property. However, the older generations must think about their care in later years. Local authorities can claim back funds if they think people have given away too many assets to avoid paying for their care. This could leave families in an even more difficult financial position. 
 
Family farms and businesses. Replacing 100% Agricultural Property Relief and Business Property Relief with 50% relief over £1million will affect many families. It will have an impact on land owners, farmers and smaller businesses which will now face IHT bills. 
 
Estate planning needs urgent review for anyone affected to maximise IHT relief. Wills might need restructuring and assets already in trust require reassessment. The changes also affect shares listed on the Alternative Investment Market (AIM) stock exchange. Now is the time for anyone holding these types of assets to review their strategy to reduce IHT. 
 
Pensions. Currently, IHT doesn’t include pensions in your estate alongside property, savings, assets, investments, and personal items. This means pensions aren’t normally subject to IHT. Instead, other tax rules apply, depending on whether you’re over or under 75 when you die. 
 
The Budget changes apply to defined contribution or 'money purchase' schemes and defined benefit or 'final salary' pensions. From 2027 your estate will include unspent pension pots and bring a 40% tax bill for anything over the threshold. If you’re over 75 when you die beneficiaries will also pay income tax when they draw on anything that remains. 
 
A consultation on implementation is promised. However, with the maximum IHT allowance for married couples frozen at £1million, many more estates will face extra bills. Again, reviewing estate planning and Wills could help minimise the impact on what you can leave to your loved ones. 
 
Property. One step you might consider is to sell property early and pass on funds to your family. Changes in Capital Gains Tax (CGT) applied immediately after the Budget. The overall rate has increased from 20% to 24% although it remains at 24% for residential property. Business asset arrangements don’t change but you should check your investment relief position. 
 
I'll be happy to help if you would like to make or review your Will in light of the Budget’s IHT measures. 
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