Excellent experience start to finish – always very responsive to any queries and the turnaround on the property I was buying was very quick, even in the busy time leading up to stamp duty deadline. Jenny was always very helpful and went above and beyond to close on a short timescale.
The Chancellor’s recent Budget has introduced significant changes affecting inheritance tax (IHT) and how Wills should be structured.
Whilst the chancellor has frozen the inheritance tax ‘IHT’ thresholds until 2030 – £325,000.00 nil rate band ‘NRB’ with a further main residence band ‘RNRB’ available £175,000.00 – only if your assets are less than £2million and you have children. She has introduced other IHT revenue streams which will impact many more estates.
Unused private pensions
From April 2027, private pension pots will be included in the value of an individual’s estate when calculating their IHT liability. This could significantly increase the IHT charge on estates, especially for those with large pension pots- rather than impact on distribution of your estate through your Will.
Changes to business and agricultural property relief
If you own a business or agricultural property, changes effective from April 2026 will impact how these assets are passed on in your Will.
The changes mean that IHT will be paid when the assets are more than £1 million per person, but this is in addition to the existing nil rate bands and exemptions. Over that sum, IHT will be payable at a 50% rate i.e. a tax rate of 20%. But 100% tax relief is available up to £1 million.
- Business Property Relief will be reduced to 50% for companies not listed on the stock exchange.
- AIM shares will from April 2026 no longer attract 100% relief from that date the relief is 50%.
Trusts and personal allowances post-budget
Trusts settled after the budget will share the personal allowance of £1million – this stops a potential tax saving plan.
Main Residence Nil Rate Band (RNRB) eligibility
The real worry to many is that estates previously qualifying for RNRB may no longer qualify if the pension pot, is added into the equation.
Tax implications of pension inheritance for Wills
Should you die over the age of 75 not only will the unused pension pot face IHT if over the threshold but the beneficiaries will pay income tax on the income drawn from it.
It is wise and recommended to seek independent financial advice from a pension expert, especially as the government has yet to refine the details of the legislation.
Gifting in your Will
If your estate is not taxable, it may be a good idea to consider your options. In particular, take care when gifting to a child in your Will.
Considerations for Gifting to Children
Your children may have amassed assets – property and pension pots – and the inheritance may push their estates over the thresholds available. One way of planning for the future could be to gift in your Will to the next generation, such as grandchildren, who may not have acquired such wealth at the time of your passing.
It is possible to gift to the next generation in one’s lifetime rather than on death in a Will. But this also needs to be considered carefully. A lifetime gift is a potentially exempt transfer (PET) and falls outside of your estate if you live for seven years after the gift is made. However, this is not always straightforward, as the gift may be subject to capital gains tax and property stamp duty land tax. Our property, commercial and corporate solicitors can advise and assist with enquiries.
Life insurance policies to cover IHT liabilities
It is anticipated that life insurance policies may in future be taken in the hope that they cover the IHT liability. Again, a good financial adviser can assist.
The importance of making a Will now
It is now more than ever, important to consider carefully making a Will. Careful planning may ensure that the generations to follow receive your assets without the unnecessary burden of IHT.
Planning beyond IHT with Powers of Attorney
Planning for the future should also include consideration of the creation of powers of attorney.
What are Powers of Attorney?
The ability to choose your preferred attorneys – people you love and trust to make decisions for you when you need them to. This can be a little extra help when you feel unable to cope or merely lack confidence. It may be due to a lack of capacity and the power to make decisions for you in your best interests.
There are two types of power of attorney:
- Property and finance – can be set up so as to provide assistance whether or not capacity is lost which may be a useful tool.
- Health and welfare – once created and registered will not be required until capacity is lost.
The Attorneys could be asked to assist but only with the consent of the person creating whilst capacity is intact.
Get expert legal and financial advice
Careful planning with the assistance of qualified professionals can safeguard your family’s future and minimise IHT burdens. Contact Davis Blank Furniss today for guidance on estate planning, making a Will, or setting up powers of attorney.
