December 5, 2025
reading time: 4 min
UK Autumn Budget 2025: Inheritance Tax Changes and Estate Planning
December 5, 2025
reading time: 4 min
UK Autumn Budget 2025: Inheritance Tax Changes and Estate Planning
Did inheritance tax change in the Autumn Budget 2025?
No, there were no changes made to the inheritance tax (IHT) rules. The nil rate band has been frozen at £325,000 since 2009 and will continue to be frozen until 5 April 2031. An additional nil rate band, called the ‘residence nil rate band’, is also frozen until 5 April 2031 at the current £175,000 level, as is the residence nil rate band taper starting at £2 million. This extended freeze pulls more estates into the IHT net because property values and asset prices continue to rise.
Did capital gains tax change in the budget?
The Capital Gains Tax rates remain unchanged for 2026/27.
Capital Gains Tax annual exemption
No changes have been implemented in the Autumn budget. The annual exempt amount will remain at £3,000 for 2026/27.
IHT increase Rules from April 2027: Unused Pension Funds and Death Benefits
The government will bring unused pension funds and death benefits payable from a pension into a person’s estate for Inheritance Tax (IHT) purposes from 6 April 2027. All death in service benefits payable from registered pension schemes will be excluded from the value of an individual’s estate for IHT purposes. The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request that the pension scheme administrator pay their IHT liability directly to HMRC in specific circumstances. They may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months. Comment? This rule change could potentially have significant effects for those with pension funds. The rules affect defined contribution pensions, not defined benefit schemes (other than death-in-service). The change especially impacts those who deliberately use pensions as an estate-planning tool, which has been very common.
For example, John made contributions to his private pension scheme. At the date of his death, aged 90, his pension fund is valued at £400,000. The remainder of his estate is valued at £1,000,000. Under the previous rules, the IHT bill would be £270,000. This will rise to £430,000 under the new rules.
Incorporation Relief
The government will introduce a requirement for taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026. The relief previously applied automatically.
Business Asset Disposal Relief
The rate applying for individuals claiming Business Asset Disposal Relief and Investors’ Relief will increase to 18% from 14% for disposals made on or after 6 April 2026. Business owners planning to sell may benefit from acting before these changes take effect.
Agricultural Property Relief & Business Property Relief
From 6 April 2026, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £1 million. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief. The £1 million limit applies per person and is refreshed every seven years. From 6 April 2026, this allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026. There may be a further £1 million allowance for trusts in certain situations but the rules are complex. The £1 million limits for both individuals and trusts will be frozen until 6 April 2031.
How can Westminster Law help?
At Westminster Law, the Wills and Estate planning team can advise you in relation to all of the above points in connection to your estate and personal circumstances.
If you are over 60, it will cost you just £95* for us to prepare your Will. Free home visit included.
Contact Westminster Law today for professional advice.
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