Labour’s second Autumn Budget arrived on 26 November with few surprises. Most of the details had already been leaked in the preceding days, giving taxpayers an unwelcome preview of what was to come.
The government has been clear about its approach: those it considers wealthy will shoulder a greater tax burden to plug holes in public finances. For individuals and families who have built substantial assets over a lifetime of hard work, the Chancellor’s decisions mark a significant shift in how estates will be taxed.
Inheritance Tax changes: What the Budget confirmed
Rather than announcing new measures, the Chancellor’s silence on Inheritance Tax (IHT) effectively locked in the reforms from the 2024 Autumn Budget. These changes have far-reaching implications for business owners, farmers, trustees and anyone with significant investments. Estate planning has moved from advisable to essential.
The 2026 changes you need to prepare for
Business and agricultural property relief: A new £1 million cap
From 6 April 2026, combined business and agricultural property relief will be limited to £1 million. Beyond that threshold, only 50% relief will apply. Business owners, farmers and investors with portfolios containing these assets face substantially higher tax bills on death.
There was one piece of positive news: the Chancellor confirmed that spouses and civil partners can transfer their business and agricultural relief allowances between them. This flexibility will be crucial for married couples and civil partners planning their estates.
The freeze continues
IHT nil rate bands remain frozen until 2030. With the basic threshold at £325,000 and the residence nil rate band at £175,000 per person, rising property values and investment growth mean more estates will face IHT liability.
Capital Gains Tax increases
Business disposal rates will rise from April 2026, adding another layer of tax to consider when planning asset transfers.
Looking ahead to 2027
Pensions enter the IHT equation
From 6 April 2027, unused pension funds will form part of your estate for IHT calculation purposes. This represents a fundamental change to pension planning and may require a complete rethink of your wealth transfer strategy.
What the Chancellor didn’t change
Speculation had suggested the government might introduce a lifetime gift limit or extend the seven-year survivorship rule for gifts. Neither materialised in this Budget.
Given the backlash against last year’s changes—particularly from the farming community—the government appears to have decided against further controversy for now.
The impact on your estate
These changes create a more complex and potentially expensive landscape for anyone with business interests, farmland or investment assets. The additional IHT burden could be substantial, and trust administration may become more complicated.
The key is to act now rather than wait.
Steps you can take
Revisit your Will and trust structures: Existing arrangements may no longer be fit for purpose under the new rules. A review can identify tax-saving opportunities and ensure your wishes are carried out effectively.
Start making lifetime gifts: The seven-year clock begins when you make the gift. Earlier action means assets have more time to leave your estate for IHT purposes.
Audit your business and agricultural assets: Confirm they still qualify for relief under the new rules, and consider whether restructuring could be beneficial.
Build a liquidity buffer: IHT bills need to be paid, typically within six months of death. Make sure there’s accessible cash available, not just illiquid assets.
How can we help?
Amanda Voakes is a Partner in our expert Wills and Probate team, advising on Inheritance Tax planning, Wills, administration of estates, grants of Probate, grants of Letters of Administration, Powers of Attorney, administration of affairs, and residential care fee planning/protection of assets.
To discuss how we can help you, please contact Amanda or another member of the team on 0808 258 0461 or via our online enquiry form.
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