The UK government’s recent changes to inheritance tax rules have many families concerned about the impact on their estates and the potential for increased tax liabilities. Experts warn that thousands more people will be paying inheritance tax in the coming years due to these changes. One significant change is the extension of the freeze on the nil-rate band threshold of £325,000 until 2030.
Rachel Steeden, head of legal at Stewardship, explains that this threshold has remained unchanged since 2009, and its value has significantly decreased due to inflation. By 2030, the £325,000 threshold will be worth even less, effectively dragging more estates into the inheritance tax net. Justin Moy, managing director at EHF Mortgages, also points out that the inclusion of pension pots in estates for tax purposes from April 2026 will further increase the number of people facing inheritance tax liability.
Inheritance tax reforms impact families
Another notable change is the reform of Agricultural Property Relief and Business Property Relief. From April 2026, the first £1 million of combined business and agricultural assets will be exempt from inheritance tax.
However, assets exceeding this amount will only receive a 50% relief, resulting in an effective inheritance tax rate of 20%. Despite these changes, Chancellor Rachel Reeves emphasizes that only 6% of estates will pay inheritance tax this year. She acknowledges the desire to pass down savings to future generations and claims to be taking a balanced approach with the new measures.
As the government implements these changes, it is crucial for families to review their estate planning strategies and seek professional advice to minimize their inheritance tax liabilities and protect their assets for future generations.