What the new Inheritance Tax rules mean for your family
Introduction
Inheritance Tax is no longer something only a small number of very wealthy families need to think about.
Rising property values, larger pension pots, business ownership, second homes, savings and investments mean more families need to understand how their estate might be taxed when they die.
Recent and upcoming rule changes make this even more important.
From 6 April 2027, most unused pension funds and pension death benefits are expected to be brought within the value of a person’s estate for Inheritance Tax purposes.
From 6 April 2026, changes to Business Property Relief and Agricultural Property Relief will affect some business owners, shareholders, farming families and landowners.
This guide explains what is changing, why it matters and what you should review. It is not about panic. It is about planning properly.
This guide is for you if:
- You own a home
- You have savings or investments
- You have a pension pot
- You own a business or farm
- You have children or grandchildren
- Your will is more than three to five years old
- You want to reduce uncertainty for your family
Inheritance Tax, often called IHT, is a tax which can be charged on the value of someone’s estate when they die.
Your estate can include:
- Your home
- Other property
- Savings
- Investments
- Personal possessions
- Business interests
- Life policies
- Some trusts
- From 6 April 2027, most unused pension funds and pension death benefits are also expected to be included
Inheritance Tax is usually charged at 40 percent on the part of an estate above the available tax-free allowances and reliefs.
The rules are detailed, and every family’s position is different. Some estates pay no IHT. Others face a significant bill.
The important point is this: you need to understand your own position before you know whether action is needed.
The main allowances
The nil rate band
Every individual has a nil rate band. This is the amount you can usually pass on before Inheritance Tax is charged.
The standard nil rate band is currently £325,000.
The residence nil rate band
There is also a residence nil rate band, which can apply when you leave your home, or a share of it, to direct descendants such as children or grandchildren.
The residence nil rate band is currently £175,000.
This means some individuals may pass on up to £500,000 before IHT is charged, if they qualify for both allowances.
For married couples and civil partners, unused allowances can often be transferred to the surviving spouse or civil partner. This means some couples may pass on up to £1 million before IHT is charged, depending on their circumstances.
| Important point
The residence nil rate band has conditions. It can also be reduced or lost for larger estates. You should not assume it applies without checking. |
One of the biggest changes relates to pensions.
For many years, pensions have often been useful for estate planning because unused pension funds could often sit outside the estate for IHT purposes.
From 6 April 2027, most unused pension funds and pension death benefits are expected to be included within the value of a person’s estate for IHT purposes.
This could affect families where someone dies leaving a pension pot which has not been used during their lifetime.
It could also change the way people think about:
- Drawing income from pensions
- Using other assets first
- Pension nomination forms
- Estate planning
- Life cover
- Wills
- The balance between pensions, savings, investments and property
This does not mean pensions are no longer useful. It does mean pension planning and estate planning need to be looked at together.
You should review your position if you:
- Have a significant pension pot
- Have planned to leave pension wealth to children or grandchildren
- Have treated your pension as outside your estate
- Have not reviewed your pension nomination forms recently
- Have a taxable estate already
- Own property, savings and investments as well as pensions
- Are widowed and have inherited allowances or assets
- Own a business or farm
- Have complex family arrangements
You should review:
- Who is nominated to receive your pension benefits
- Whether your nominations are up to date
- How your pension fits with your will
- Whether your estate could face an IHT liability
- Whether life cover should be considered
- Whether your retirement income strategy still makes sense
- Whether your family would have enough liquidity to pay tax
A common mistake is looking at the will but ignoring the pension. That approach is becoming riskier.
Business Property Relief and Agricultural Property Relief have historically helped some business and farming assets pass on with reduced or no Inheritance Tax.
From 6 April 2026, reforms will limit the value of property eligible for 100 percent relief. A new allowance will apply to the combined value of qualifying agricultural and business property. Relief at a lower rate is expected to apply above the allowance.
This is especially relevant for:
- Business owners
- Shareholders
- Farming families
- Landowners
- Families with trading businesses
- Families with business assets held for succession planning
- People who expected business or agricultural assets to pass free of IHT
These rules are detailed and need advice. The main message is simple: business owners and farming families should review their succession planning now.
If you own a business, you should consider:
- Who owns the shares
- Whether the business qualifies for relief
- Whether your will deals with your business interests properly
- Whether shareholders’ agreements match your estate planning
- Whether family members are involved in the business
- Whether there is a clear succession plan
- Whether life cover is needed
- Whether the business would have enough liquidity if tax became payable
- Whether trusts or lifetime planning should be considered
Business planning, tax planning and family planning should work together. A will alone is rarely enough.
Why your will matters more than ever
Your will is one of the most important documents you will ever sign.
It decides who receives your estate, who deals with your affairs and how your wishes are carried out.
But a will written several years ago may no longer reflect your current life.
You should review your will if:
- You have married
- You have divorced or separated
- You have had children or grandchildren
- You have bought or sold property
- You have inherited money
- You have started, grown or sold a business
- You have a blended family
- Someone named in your will has died
- Your executors are no longer suitable
- Your financial position has changed
- You are worried about IHT
- Your will is more than three to five years old
A will review does not always mean a complete rewrite. Sometimes small changes are enough. Sometimes a wider review is needed, especially where tax, pensions, trusts, care planning, business assets or family dynamics are involved.
Pension nominations: a small form with big consequences
Pension nomination forms, sometimes called expression of wish forms, tell pension trustees or providers who you would like to receive pension benefits when you die.
Many people fill them in once and forget about them. That can create problems.
You should check your pension nominations if:
- You have married
- You have divorced or separated
- You have children or grandchildren
- A nominated person has died
- You have changed your will
- You have moved pension providers
- You have several pension pots
- You want your pension planning to match your estate planning
From April 2027, pension nominations will become even more important because pension death benefits and IHT planning will be more closely connected.
Your will and pension nominations should be reviewed together.
Lifetime gifts: useful, but not always simple
Gifting during your lifetime can be an effective part of estate planning. But gifts need to be made carefully.
Common types of gifts include:
- Gifts to children or grandchildren
- Regular gifts out of income
- Wedding or civil partnership gifts
- Charitable gifts
- Gifts into trust
- Helping with a house deposit
- Passing on personal possessions
There are rules about how gifts are treated for IHT. Some gifts fall out of your estate if you survive for seven years. Some gifts are immediately exempt. Some gifts remain relevant if you continue to benefit from the asset.
For example, giving away a house but continuing to live in it rent-free is unlikely to achieve the intended IHT result.
Good record keeping matters. Families should keep a clear note of:
- What was gifted
- When it was gifted
- Who received it
- Where the money came from
- Whether it was a one-off gift or regular gift
- Whether any exemption was being relied upon
Poor records can make probate harder and increase stress for families later.
Trusts: useful in the right circumstances
Trusts can help with estate planning, but they are not right for everyone.
A trust might be considered where you want to:
- Protect assets for children or grandchildren
- Provide for a vulnerable beneficiary
- Support a blended family
- Control when someone receives money
- Protect family wealth
- Plan for IHT
- Separate control from benefit
Trusts have tax, legal and administrative consequences. They should only be used where there is a clear reason.
The question is not, “Do I need a trust?” The better question is, “What problem am I trying to solve?”
Property ownership: check how your home is held
For many families, the home is the largest asset. How property is owned can affect what happens on death.
Property may be owned as:
- Sole owner
- Joint tenants
- Tenants in common
If you own property as joint tenants, your share usually passes automatically to the surviving owner when you die, regardless of your will.
If you own property as tenants in common, your share can pass under your will.
This distinction can matter for estate planning, care planning, blended families and tax planning.
You should check how your property is owned if:
- You are married or in a civil partnership
- You are unmarried but own property together
- You have children from a previous relationship
- You want to protect a share of the property
- You have made or changed a will
- You are reviewing later life planning
Powers of Attorney: the missing part of many plans
Inheritance Tax planning focuses on what happens after death. But good planning should also consider what happens during your lifetime if you lose capacity or need help managing your affairs.
A Lasting Power of Attorney allows trusted people to make decisions for you if needed.
There are two types:
- Property and Financial Affairs
- Health and Welfare
Without an LPA, your family may need to apply to the Court of Protection if you lose capacity. That can be slower, more expensive and more stressful.
A strong estate plan should usually include:
- A current will
- Up-to-date pension nominations
- Lasting Powers of Attorney
- Clear financial records
- A review of IHT exposure
- A plan for later life decisions
Life cover and liquidity
Some families have valuable estates but limited cash. That can create a problem if IHT is due.
For example, wealth may be tied up in property, land, a business or pension assets. The estate may have a tax bill before assets are easily sold or transferred.
Life cover written in trust can sometimes help provide funds to meet an IHT liability.
This does not reduce the value of the estate in the same way as some planning steps, but it can help families deal with the tax bill when it arises.
This needs financial advice.
| Key question
If IHT were payable, how would my family pay it? |
Common mistakes to avoid
- Assuming your estate is too small for IHT.
- Forgetting about pensions.
- Relying on an old will.
- Not checking pension nominations.
- Ignoring business assets.
- Making gifts without advice.
- Not keeping records.
- Forgetting Powers of Attorney.
- Assuming everything passes automatically to the right people.
- Waiting too long.
Your IHT planning checklist
Will
- Is your will up to date?
- Does it reflect your current wishes?
- Are your executors still suitable?
- Does it deal with your property, business and family circumstances properly?
Pensions
- Do you know the value of your pension pots?
- Are your nomination forms up to date?
- Do your pension nominations work alongside your will?
- Have you considered the April 2027 changes?
Property
- Do you know how your home is owned?
- Do you own any second property or investment property?
- Does your property ownership match your estate plan?
Business or farming assets
- Do you know whether your assets qualify for relief?
- Have you reviewed the April 2026 changes?
- Is there a succession plan?
- Would the business have cash available if tax became payable?
Gifts
- Have you made gifts in the last seven years?
- Are those gifts properly recorded?
- Are you making regular gifts out of income?
- Have you taken advice before making larger gifts?
Trusts
- Do you have any existing trusts?
- Are they still needed?
- Are they being administered properly?
- Would a trust help solve a specific family or tax issue?
Life cover
- Do you have life insurance?
- Is it written in trust?
- Would your family have cash available to pay any IHT?
Powers of Attorney
- Do you have Lasting Powers of Attorney?
- Are your attorneys still the right people?
Do your family know where your documents are kept?
You should consider taking advice if:
- Your estate may be worth more than £325,000
- You own a home and want to leave it to children or grandchildren
- You have a pension pot you hope to pass on
- You own a business or farm
- You have a second home or investment property
- You have children from a previous relationship
- You are unmarried but live with a partner
- You have made significant gifts
- You are concerned about care fees or later life planning
- Your will is more than three to five years old
- You want your family to avoid uncertainty later
The best time to review your planning is before there is a problem.
How Cullimore Dutton can help
At Cullimore Dutton, we help people and families make clear, confident decisions about wills, trusts, probate, estate planning, powers of attorney and later life planning.
We take time to understand your family, your assets, your concerns and your wishes.
We can help you review:
- Your will
- Your estate planning
- Inheritance Tax exposure
- Pension nominations
- Property ownership
- Trusts
- Powers of Attorney
- Business succession planning
- Later life planning
We also work closely with our financial planning team where legal and financial advice need to come together.
The aim is simple: to help you protect the people and things that matter most.