Inheritance Tax changes: why now is the time to get ahead with estate planning

Inheritance Tax (IHT) has long been a consideration for estate planning, but a series of upcoming changes in 2027 means it deserves closer attention more than ever.

From reforms affecting pensions to thresholds that have been frozen for years, the IHT landscape is shifting in ways that could affect more families than many people expect. Here, estate planning lawyer, Helene Bryant, explains what is changing with IHT, who it affects, and why now is a good time to review your estate plan.

What is Inheritance Tax and who pays it?

Unless you have a surviving spouse who is inheriting your estate or you are gifting your estate to charity, Inheritance Tax is a tax that is charged to your estate after your death. IHT is generally charged at 40%, based on the value of your estate, including property, money and possessions, if it’s worth more than £325,000. The allowance is up to £500,000 if you are a parent leaving residential property to direct descendants including children (biological, adopted, stepchildren and foster children), grandchildren and great-grandchildren.

IHT must be paid from your estate by the Executors of your Will within six months of your death, otherwise it will attract interest, currently at 7.75%.

Before a probate application can be made so that your estate can be administered, your Executors must provide an Inheritance Tax receipt.

What is an Inheritance Tax (IHT) receipt?

An Inheritance Tax receipt documents how much tax HMRC has collected from a deceased’s estate. Having an IHT receipt is a fundamental part for anyone settling an estate to progress the probate application, as it confirms that the right amount of tax has been paid.

Why are IHT receipts at a record high?

Recent data shows IHT receipts were up £0.2 billion to £8.5billion for the 2025/ 2026 tax year, and forecasted to rise to £14.7 billion in 2030/31. This has been linked to increasing property prices, frozen IHT thresholds and changes that are coming in April 2027.

The 2025 Autumn Budget froze the IHT nil-rate band until 2031, meaning rising property values have been quietly pulling more estates into IHT territory, even where families don’t consider themselves ‘wealthy’.

On top of this, from April 2027, pensions will be brought into IHT for the first time. This is why it’s so important to consider IHT as part of your estate planning process, to avoid your loved ones getting caught out.

What Inheritance Tax changes are happening in April 2027?

IHT on pensions

Until now, pensions have been outside of someone’s taxable estate. A person has been able to nominate their unused pension pot to whomever they wish without needing to pay any IHT on it. From 6^th April 2027, unused pension funds, including private and workplace pensions will form part of the value of a person’s estate for IHT purposes and be included in IHT calculations.

These changes were first hinted at in the 2024 Autumn Budget, as part of Rachel Reeves’ planned measures to reform Inheritance Tax meaning that even a modest estate may now be pulled into the IHT net.

Who will be affected by IHT on pensions?

IHT changes will impact individuals who are inheriting estates, beneficiaries of unused pension funds, personal representatives and Pension Scheme Administrators.

Executors will be responsible for reporting details of unused pension funds and arranging payment of the Inheritance Tax to HMRC.

Why you should get ahead with estate planning

Estate planning gives your loved ones security and peace of mind after you have passed away, ensuring your assets are distributed according to your wishes set out in your Will.

Proper estate planning includes having a Will in place and ensuring your assets are structured effectively. It is also important to consider whether a Trust is appropriate for protecting your assets as well as having a Lasting Power of Attorney. Acting sooner rather than later matters; planning takes time particularly as  circumstances and tax laws change.

Effective tax planning can help minimise the impact of Inheritance Tax. A specialist estate planning solicitor can advise you on the IHT impact for your estate, but it is also wise to seek advice from an independent financial advisor and/or accountant for the best way to structure and manage your assets in order to mitigate Inheritance Tax.

How we can help with estate planning

Our expert estate planning solicitors can help you with:

• Writing or updating you Will
• Creating and managing Trusts
• Creating, registering and advising Lasting Powers of Attorney (LPAs)

Contact our estate planning solicitors

If you’re unsure how the new changes to Inheritance Tax will affect your estate, or you’d like to speak to our solicitors about estate planning, fill in our online enquiry form or call us on 0117 325 2929.

Information correct at the date of publishing