If you have seen the recent news reports concerning the upcoming Autumn Budget, speculation on another round of inheritance tax changes may be ringing alarm bells. And if you are one of those who had previously been confident that your pension and property would pass smoothly to your loved ones, now is the time to revisit your plans.
What Will Happen in the Autumn Budget 2025?
Speculation in the press suggests that Chancellor Rachel Reeves is set to make another round of Inheritance Tax (IHT) changes in the upcoming Autumn Budget. If true, this would be in addition to previously announced changes in last year’s Budget, which is set to charge tax on inherited pensions from April 2027. The changes mean that once protected retirement savings could now face hefty tax obligations. And if you own farmland or business assets, as of 2024, new caps on reliefs also mean further tax bills on anything over £1 million.
What are the Changes Already in Effect?
- Threshold Freeze: Nil-Rate Band (NRB), currently £325,000 per individual, will be frozen until 2030.
- Inheritance Tax on Pensions: From April 2027, inherited pensions will be subject to IHT.
- Reduced Reliefs for Farms and Businesses: From 2024, agricultural and business property reliefs have been capped at £1 million, with excess taxed at 20%.
- Introduction of the Long-Term Resident (LTR) Status: A shift from domicile-based to residence-based taxation for long-term UK residents, meaning that an individual will be classified as a Long-Term Resident (LTR) if they have been a UK tax resident for 10 or more of the past 20 tax years. Once classified as an LTR, individuals will be liable for IHT on their worldwide assets, regardless of their domicile status.
- Trusts: The IHT status of a trust will be based on whether the settlor was an LTR at the time the IHT charge arises (such as their death or a trust anniversary charge) rather than at the time the trust was created. Non-UK assets will no longer be classified as excluded property and will be subject to IHT.
What Are the Proposed Changes in the Autumn 2025 Budget?
According to various news outlets, including This is Money, Reeves is reportedly looking at several additional inheritance tax changes, including lifetime gifting allowances. If introduced, this would be one of the most significant IHT changes, minimising the amount people can pass on to their beneficiaries without incurring tax. For example, if parents were to ‘gift’ the deposit of a house to their child, there is the potential that this would be subject to an IHT bill.
- Current Gifting Rules:
- Annual exemption: £3,000 per person.
- Small gifts: £250 per recipient.
- Wedding gifts: £1,000–£5,000 depending on relationship.
- Seven-year rule: Gifts are exempt if the donor survives 7 years.
- Taper relief applies to gifts made 3–7 years before death.
- Proposed changes to gifting rules:
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- Introduction of a cap on total gifts allowed before death
- Potential removal or reduction of taper relief
- Possibly increasing the exemption period to 10 years
Sources:
- This is Money: How could Rachel Reeves change inheritance tax – and what would it mean for you?
- Tax Trends: The UK’s Inheritance Tax Reforms for 2025: Key Changes and Implications
- Telegraph: Taper Relief & Gifting Cap
What can you do?
While experts recommend against making any drastic changes, careful estate planning is advisable. At Rose & Rose, our private client team and estate planning specialists are here to help you understand the options available. We realise that these changes can be unsettling, but with the proper guidance, you don’t have to be caught off guard.
The next important step is to speak with a regulated professional, with expertise in inheritance tax planning, who can assist you in putting a plan in place. We can help you review your Will, understand how to use trusts strategically and prepare for other potential changes. Our goal is to help you protect your estate in the most efficient way possible and avoid any common pitfalls.
Book a consultation with a member of our private client team today to start your inheritance tax planning with confidence.
Talk to our Inheritance Tax Planning Solicitors Near You
At Rose & Rose, we have a team of highly experienced and knowledgeable inheritance tax planning solicitors who can support you in organising your estate and pension allowances in the most efficient way, ensuring that all circumstances are considered and advising on the right solution for you and your family.
To speak to one of our private client solicitors about your estate plan or inheritance tax, please contact a member of our team below or email info@roselegal.co.uk for more information.
Related Articles:
- Have You Protected Your Estate Against the New Pension Changes?
- Conducting a Personal Possessions Review for Your Will
- Most People Do Not Understand Inheritance Tax – But Here is Why You Should
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors.
