Government may be setting sights on Inheritance Tax

The Treasury is reportedly revisiting Inheritance Tax (IHT) as ministers hunt for extra revenue.

While the Chancellor considers several options, IHT reforms remain a likely avenue, and now may be a good time to restructure your assets to avoid a larger IHT bill.

How could Inheritance Tax change?

No decisions have been finalised, but several serious proposals are circulating.

The clearest change already announced is that unused pension pots will be brought into the IHT net from April 2027.

That single change will bring many more estates into scope and has already altered planning strategies.

Gifting, a common tool to reduce IHT exposure, is under particular scrutiny.

Policymakers are discussing measures to curb or restrict gifting and may adjust the tapering that currently applies.

At present, gifts made within seven years of death remain relevant to IHT and are taxed at a tapered rate, while those made earlier are generally ignored.

The current rates are:

• 32 per cent for gifts made three to four years before death
• 24 per cent for gifts made four to five years before death
• 16 per cent for gifts made five to six years before death
• 8 per cent for gifts made six to seven years before death

It is believed that these rules could be subject to change in the Autumn Budget, although nothing is confirmed yet.

What can I do to lower an Inheritance Tax bill?

With uncertainty ahead, the smart first step is to quantify your estate so you know what might be exposed.

For pensions, consider how the 2027 change could shift the tax burden and whether drawing income or adjusting death benefits fits your plan.

It is then time to reassess gifting strategies.

While lifetime gifts still have value, their effectiveness will depend on any reforms brought in by the Chancellor.

Whatever the Chancellor decides, we are ready to help you review and restructure your assets to remain as tax-efficient as possible.

To ensure that you retain the most control of your assets even after you go, speak to our team for tailored Inheritance Tax planning.