Inheritance Tax Changes: What They Mean For You
The UK government’s recent reforms to Inheritance Tax (IHT), announced in the October 2024 Budget, represent some of the most significant changes in over a decade. These updates will have a profound impact on estate planning, pensions, and legacy strategies.
Understanding these new IHT rules is essential to protect your wealth and minimise future tax liabilities. At Aetas Wealth, we specialise in bespoke estate planning solutions to help clients navigate these complex changes with confidence.
Key Changes to UK Inheritance Tax
1. Pensions to Be Included in Estates (from April 2027)
From April 2027, most unspent pension funds and death benefits will form part of an individual’s estate for inheritance tax purposes. This means your pension could now contribute toward a potential 40% IHT liability, unless appropriately structured.
2. Capping of Agricultural and Business Property Reliefs (from April 2026)
Reliefs for agricultural and business assets will be capped at £1 million per estate. Amounts above the threshold will be taxed at a reduced rate of 20%, with an option to pay in interest-free instalments over ten years.
3. Abolition of Non-Domiciled Tax Status (from April 2025)
The current “non-dom” regime will be replaced by a residency-based system.
New UK residents can claim exemption from foreign income and gains for their first four tax years, if they were non-resident for the previous ten.
4. Inheritance Tax Thresholds Frozen Until 2030
The nil-rate band (£325,000) and the residence nil-rate band (£175,000) will remain frozen until 2030.
Due to inflation and rising property values, more estates will exceed the thresholds over time — a phenomenon known as “fiscal drag”.
Implications of These Changes for Estate Planning
These IHT changes carry several significant implications for individuals, families, and business owners:
🔹 Pensions Now Taxable Under IHT
Clients must now reassess their pension strategies, especially those with large defined contribution pots or uncrystallised pensions.
🔹 Impact on Family Farms and Businesses
The cap on reliefs could force the sale of family-owned farms or businesses to cover IHT bills, unless proactive planning is in place.
🔹 New Rules for International Families and Expatriates
Non-domiciled clients living in the UK will now face UK tax on worldwide income and assets, requiring a full review of international estate structures.
🔹 Fiscal Drag Increases Tax Exposure
Frozen thresholds mean that more middle-income families could face inheritance tax due to natural asset growth, particularly in property-rich areas.
How Aetas Wealth Can Help You Plan for the Future
At Aetas Wealth, we offer a comprehensive, client-first approach to estate and inheritance tax planning.
- Integrated Financial Planning
We look at your entire financial picture — pensions, investments, protection, and cashflow — to create a clear path to your goals. - Estate Planning and LegaciesWe help clients structure their estates tax-efficiently, ensuring their wealth passes to future generations as intended.
- Inheritance Tax Mitigation Strategies
From gifting strategies to trusts and Business Relief investments, we design tailored solutions to help minimise your IHT exposure.
Ready to Future-Proof Your Estate?
The new inheritance tax rules demand immediate attention. Whether you’re a business owner, retiree, or family wealth steward, Aetas Wealth is here to support you with clear advice and tax-smart planning.
Estate Planning Has Never Been More Important but with the right advice and timely action, you can protect your legacy.
Aetas Wealth offers the expertise and insight you need to stay ahead of these changes — and give your family peace of mind.