The rules governing Inheritance Tax (IHT) are constantly subject to change.
Even the amendments set to be introduced in April 2026 could be subject to revision and further alterations in the near or far future.
Changes to IHT could affect your carefully laid estate plans, so it is essential to keep your Will under constant review to ensure your beneficiaries receive the maximum amount from your estate with minimal IHT liability.
Inheritance Tax: The ever-changing liability
The Autumn Budget 2024 introduced significant changes to Business Property Relief (BPR) under IHT, effective from April 2026.
Under these rules, 100 per cent tax relief on business assets will be capped at £1 million per individual, with relief 50 per cent thereafter – resulting in a higher rate of IHT upon your death.
Additionally, while many pension pots currently fall outside of IHT calculations, the Government plans to include pensions within the scope of IHT from April 2027.
This change, combined with the freeze on IHT thresholds until 2030, would mean that more estates will likely exceed the £325,000 IHT threshold.
However, these proposed rules are not set in stone, and professional services advisers across the UK anticipate further changes to IHT.
IHT is an ever-changing tax liability, so it is important to review your Will regularly with the help of an experienced solicitor.
This ensures your Will is aligned with the most up to date tax rules.
If you do not have a Will in place, it is essential to prepare one now and revisit it regularly to help you mitigate against tax liabilities.
Ways to reduce IHT
There are several ways in which you can prepare your Will and estate plan to minimise IHT liabilities. A solicitor can advise you on the options available and which avenues are best suited to your wishes.
A flexible Will, such as one that includes a trust, allows you to adapt your asset distribution based on future changes in tax laws, making it a potentially favourable option.
With a discretionary trust, your estate can allocate assets to beneficiaries at the trustee’s discretion, which means that decisions can be taken at the time of your passing, taking into account the tax rules at that time and the personal and financial circumstances of all beneficiaries. As such, trustees can consider how best, at that time, to mitigate IHT in the way they distribute the assets held in trust.
Additionally, you may want to review your lifetime gifting strategy. Making gifts can reduce the IHT burden on your estate.
However, gifts must be made seven years prior to your death to be exempt from IHT, so early planning is vital.
It is important to remember that when making gifts, there may be legal steps and documentation that needs to be put in place for it to take effect.
For example, a gift of property or land requires a formal transfer deed or declaration of trust to document the change of ownership.
Legally documenting each gift’s details including its date, value, and recipient is a safeguard against potential future legal disputes.
For example, you need to be clear about the terms of the gift to avoid the creation of an implied trust.
If the donor appears to retain some control over the gifted asset, it may not qualify as a gift for legal or tax purposes and could lead to disputes or unintended tax consequences.
A solicitor can guide you on how to structure these gifts to maximise the benefit for both you and your beneficiaries.
Secure your legacy with a Will
Beyond minimising the IHT liability on your estate, a Will ensures that your assets pass to the beneficiaries of your choosing, prevents a lengthy and costly estate administration, and protects cohabitees (including unmarried partners) and children (particularly minors and/or those from first marriages).
Dying without a Will can be extremely problematic, costly and stressful.
By not having one, you could inadvertently hurt those you love and cause costly, painful, and lengthy litigation amongst those affected.
At Palmers Solicitors, we make the Will preparation process as easy as possible, giving you peace of mind knowing that your legacy is secure.
Our expert private client solicitors are equipped to help you with all aspects of estate planning, from setting up trusts to preparing for future tax changes.
To find out more about amending your Will and reviewing your estate plan, contact us today.