Inheritance tax is becoming a bigger concern for many families.
It was once seen as something that only affected the very wealthy, but with house prices rising, pension pots growing and tax thresholds remaining frozen, more people are now being pulled into the inheritance tax net.
In our latest podcast, Francesca is joined by Graeme and Charlie to discuss why inheritance tax is such a hot topic, what the upcoming 2027 pension changes could mean, and why families may need to start planning earlier than they think.
You can watch the full conversation on YouTube here:
https://youtu.be/7SftbXgA5Ew
Why inheritance tax matters
Inheritance tax is broadly a tax on the value of someone’s estate when they pass away.
An estate can include property, savings, investments, business interests, personal assets and, from April 2027, many unused pension funds.
The standard inheritance tax rate is 40% above the available tax-free thresholds, so the cost can be significant if no planning has been considered.
As Graeme explains in the podcast, this is no longer just an issue for the very wealthy. A family home, savings and a pension pot can be enough to create an inheritance tax problem.
Frozen thresholds and rising asset values
One of the main reasons more families are being affected is that inheritance tax thresholds have not kept pace with rising asset values.
The nil-rate band has been frozen at £325,000 since 2009 and is due to remain frozen until 2031.
At the same time, property values and pension savings have increased considerably. This means people who may not think of themselves as wealthy could still leave an estate that creates an inheritance tax bill.
The 2027 pension changes
A key part of the episode focuses on pensions.
From April 2027, many unused pension funds and pension death benefits are expected to be included within someone’s estate for inheritance tax purposes.
This could have a major impact on families, particularly where someone has built up a sizeable pension pot.
For years, pensions have been a very useful part of tax and retirement planning. These changes mean they may now need to be reviewed more carefully as part of wider inheritance tax planning.
Gifting and the seven-year rule
The team also discuss lifetime gifting.
Giving assets away can be an effective way to reduce the value of an estate, but it is not always straightforward. In many cases, the person making the gift needs to survive seven years for it to fully fall outside their estate.
There can also be other tax consequences, particularly where assets such as rental properties are gifted. In those cases, capital gains tax may need to be considered as well.
That is why inheritance tax planning should not be looked at in isolation.
Business owners and farmers
The podcast also touches on changes affecting business owners and farmers.
Business Property Relief and Agricultural Property Relief have historically been very valuable inheritance tax reliefs. However, changes to these rules mean some families may need to think carefully about succession planning and how tax liabilities could be funded in the future.
This is especially important where wealth is tied up in land, buildings or business assets rather than cash.
The key message
The main takeaway from this episode is simple: inheritance tax planning should be considered early.
If inheritance tax is unlikely to affect you, that gives peace of mind.
If it could affect you, early planning may give you more options and help avoid unnecessary tax problems for your family in the future.
Tax rules change, family circumstances change and asset values change, so it is important to keep plans under review.
🎧 To hear the full discussion and get practical insight from our team, watch the full podcast episode here: https://youtu.be/7SftbXgA5Ew
