Planning for the Future: What Families Need to Know About Inheritance Tax Changes
The October 2024 Budget introduced major changes to Inheritance Tax (IHT), particularly for families with trading businesses or farmland. From April 2026, relief will be capped at 100% on the first £1 million of qualifying assets. Anything above that will see only 50% relief, significantly reducing previous exemptions.
This change has triggered urgent estate planning conversations. Families must now act to safeguard their wealth and ensure a smooth financial legacy.
Lifetime Gifting: Simple, Smart, and Effective
One of the most effective ways to reduce IHT is gifting assets during your lifetime. If you live for seven years after making a gift, the assets fall outside your taxable estate.
Business owners may also use holdover relief to avoid Capital Gains Tax (CGT) when gifting certain assets, passing them on at the original base cost.
However, gifting requires careful cash flow planning — you need to ensure you’re not compromising your own financial future. The good news? The £1 million relief resets every seven years, allowing strategic, phased gifting over time.
Selling Assets? Prepare for Tax Implications
If gifting isn’t viable, you may consider selling the business or land. But beware: sales after April 2026 will be subject to 40% IHT on death, rather than the reduced 20% currently available.
Placing assets into a trust before selling could help protect the proceeds, though future rules may increase costs and complexity. Any sale also triggers CGT — so it’s essential to plan how you’ll cover this liability.
To maintain income, many are now turning to tax-efficient investments like gilts and qualifying bonds, which offer steady returns in today’s high-interest environment.
Life Insurance: A Flexible Safety Net
For many, life insurance in trust provides a cost-effective way to cover an expected IHT bill. Term policies can bridge the seven-year risk window after gifting, ensuring peace of mind.
When written in trust, pay-outs are IHT-free — but premiums will depend on your age and health. Used alongside gifting or trust planning, insurance can be a powerful tool.
Blended Strategy: The Best of All Worlds
The new IHT rules are complex — so a blended approach often works best. Combining lifetime gifting, trust use, and targeted insurance can help families stay flexible while preserving their assets.
Early action is key. Starting now gives you more time, more options, and a better chance of securing the future you’ve worked hard to build.
Take Action Now to Protect Your Legacy
If your family may be impacted by the 2026 IHT changes, don’t wait. Early planning ensures your estate is structured efficiently, reducing unnecessary tax and preserving wealth across generations.
Need advice tailored to your situation? Get in touch — we’re here to help you protect what matters most.
Disclaimer:
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE. THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU MAY GET BACK LESS THAN YOU INVESTED.