Inheritance Tax in 2025: What’s Changed?
Why Financial Advice Has Never Been More Valuable
The 2024 Budget was a pivotal moment for inheritance tax (IHT) planning. While it didn’t deliver the radical abolition some had predicted, it made meaningful and nuanced changes that affect how estates are taxed, how wealth is passed on, and how families need to plan.
For individuals and families thinking about their legacy, this is no time for a “wait and see” approach. The value of working with a financial adviser has never been clearer. Here’s everything you need to know about the shifting inheritance tax landscape—and how to respond with confidence.
As The Telegraph’s money editor Tom Rees noted:
“The people who lose most in this Budget are those who delay planning. The winners? Families who take advice, structure their estates early, and adapt.”
Pre- and Post-Budget: A Clear Comparison of the IHT Landscape
The Budget delivered changes through the back door—threshold freezes, rule tightening, and relief restrictions. Here’s how things looked before and after the 2024 Budget.
Area | Pre-2024 Budget | Post-2024 Budget |
Nil-Rate Band (NRB) | £325,000 frozen until 2028 | Also frozen until 2030 – inflation makes it less effective year on year |
Residence Nil-Rate Band (RNRB) | £175,000 per person, transferable, frozen until 2028 | Freeze extended until 2030 – rising house prices mean more estates paying IHT |
Pensions & IHT | DC pensions typically excluded from the estate | From April 2027 included in IHT calculations |
Business Relief (BR) | 100% relief for qualifying investments | From 5 April 2026, the first £1 million of combined agricultural and business property will continue to receive 100% relief, with 50% relief on amounts over £1 million. |
Agricultural Relief | 100% relief for qualifying farmland and estates | From 5 April 2026, the first £1 million of combined agricultural and business property will continue to receive 100% relief, with 50% relief on amounts over £1 million. |
Trusts | Trusts could shield assets from IHT with appropriate planning | Increased scrutiny; further reform expected (especially around multiple trust structures) |
IHT Rate | 40% over the nil-rate threshold | Unchanged, but the changes mean many more estates will now pay IHT |
Why These Changes Matter
While tax rates haven’t risen, more people are paying more inheritance tax. Inheritance tax receipts reached £7bn between April 2024 and January 2025, an increase of £0.7bn when compared to the same period last year. Inheritance Tax receipts look like they are only going to increase.
The Government’s approach is clear: by freezing allowances while asset values rise, they’re collecting more tax without technically increasing it.
This approach is pulling ordinary families—especially homeowners in the South East and London—into a tax previously associated with the ultra-wealthy.
Now more than ever, smart, proactive planning with a financial adviser could potentially save your family hundreds of thousands of pounds.
How we can Help You Navigate the New Landscape
- Rethinking Pensions: No Longer a Safe Shelter
Before the Budget, many advisers encouraged clients to preserve pension wealth and draw income from other assets—because pensions passed on free of IHT.
What’s changed:
The Government has now made DC pensions part of the taxable estate for IHT purposes. For high-value pension pots, this removes one of the most powerful IHT shelters available. If the deceased dies on or after their 75th birthday, withdrawals from the pension by beneficiaries is subject to income tax at their marginal rate, potentially meaning that funds could be subject to overall effective taxes of up to 67% before reaching the beneficiary.
What we can do:
- Recalculate income strategies to balance pension drawdown vs other investment usage.
- Consider early pension access or redistribution strategies to optimise tax.
- Ensure beneficiaries are properly nominated to avoid unnecessary tax exposure.
- Gifting: Beyond the Basics
Many families underuse their gifting allowances, or don’t document them properly, missing out on substantial tax savings.
What you can still do:
- Annual exemption: Give away £3,000 per year (per individual) tax-free.
- Small gifts exemption: £250 to any number of individuals each year.
- Normal expenditure out of income rule: This powerful rule allows you to gift unlimited sums if they are regular, come from income, and don’t affect your lifestyle.
Where we can help:
- Sets up a structured, compliant gifting strategy.
- Document gifts correctly to satisfy HMRC.
- Builds gifting into your overall retirement income plan to avoid running out of capital.
- Trusts: Still Valuable—But More Complex
Trusts remain a powerful estate planning tool. But they now come with stricter rules and closer scrutiny.
Status:
- Trusts are still subject to the “7-year rule” and periodic charges.
- However, new proposals aim to simplify (and potentially limit) tax advantages from using multiple trusts.
We can help by:
- Matching the right trust type (e.g., discretionary, life interest, bare) to your goals.
- Ensuring compliance with reporting and tax requirements.
- Coordinating trust planning with legal and tax professionals to avoid pitfalls.
- Business Relief: Still Worthwhile, But More Restrictive
BR allows you to pass on qualifying business assets free from IHT after two years. Post-Budget, this is still available—but tighter.
What’s changed:
- Relief is now capped at £1m (rather than unlimited).
- Business relief for shares that are not listed on a recognised stock exchange, which includes AIM shares, will reduce to 50% (i.e. 20% tax). The £1m allowance does not apply to these shares.
What to do:
- Get professional help to choose qualifying BR-eligible investments.
- Conduct ongoing reviews to ensure the assets still qualify over time.
- Use BR assets as part of a larger estate planning strategy.
- Family Investment Companies (FICs): A Modern Alternative to Trusts
As trust rules tighten, many wealthy families are turning to Family Investment Companies to manage intergenerational wealth.
Why use an FIC:
- Tax-efficient structure to pass on investment wealth.
- Retain control while giving growth to children or grandchildren.
- Useful for income planning, gifting, and future IHT savings.
Why you need advice:
- FICs must be correctly structured to avoid anti-avoidance rules.
- Legal, tax and investment coordination are essential.
- An adviser ensures the FIC fits into your wider estate and income strategy.
A Final Word: Inheritance Tax Planning Is No Longer Optional
The Budget didn’t increase IHT rates—but it made the system more punishing by design. More estates will pay more tax, unless action is taken early.
How Aetas Can Help
We work with clients across the UK to design and implement bespoke inheritance tax strategies, tailored to your wealth, your family, and your values.
With access to independent investment platforms, trust professionals, and estate planning lawyers, we build integrated solutions that go far beyond off-the-shelf advice.
- Estate planning reviews
- Pension & investment structuring
- Lifetime gifting strategies
- BR/AIM portfolios and IHT-efficient investments
- Trust & family company coordination
Act Now – While You Still Have Options
Inheritance tax is one of the most avoidable taxes—but only if you act in time. With the right advice, you can preserve more of your wealth for those you love.
Book a no-cost, obligation free consultation today