As IHT receipts continue to rise in the run up to the Autumn Budget, so does the worry from households about what further changes to the tax might come, says Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services.
We’re hearing from a wider range of clients than ever – business owners, teachers, senior NHS staff – all deeply worried about what might be announced in the upcoming Budget, and how quickly it would take effect.
With rumours already circulating, such as changes to gifting, some are considering rushing to pass on wealth to loved ones or even withdrawing pension savings early. But panic planning rarely pays. While the anxiety is understandable, these moves can trigger unexpected tax bills or cause lasting damage to long-term financial security that can be difficult, if not impossible, to undo.
The smartest move now isn’t to panic, but to prepare. By seeking expert advice early, families can protect their wealth, keep their options open, and be ready to act with confidence when the Chancellor delivers the Budget.
A few practical steps to help manage IHT exposure include:
Using gifting rules while they’re still clear
Gifting remains a proven way to reduce IHT liability, but with rumours swirling around possible caps and changes, acting under today’s rules may offer more certainty. Currently, people can:
- Give up to £3,000 per year tax free
- Make unlimited gifts to a spouse or civil partner
- Gift from surplus income immediately IHT free – if it’s regular, affordable, and well-documented
Most other gifts fall under the seven-year rule, so timing matters. Early planning and professional support can help maximise the impact of any gifts and avoid surprises.
Consider a trust to stay in control
Trusts let assets be passed on while keeping a say in how and when they’re used making it especially useful for younger or vulnerable beneficiaries.
They’re often a middle ground for those uneasy about gifting large sums outright. But trusts are complex, and with potential reforms to how they’re taxed, it’s wise to get advice now to ensure intentions aren’t derailed later.
Don’t rush into pension decisions
From April 2027, pensions will become part of the IHT net, even if people pass away before reaching minimum pension age.
On top of that, if they die after 75, beneficiaries may also pay income tax on withdrawals, pushing the total tax burden beyond 60% in some cases.
Understandably, some are exploring early drawdowns to avoid this. But hasty decisions could reduce future income and trigger avoidable tax liabilities. While the government has suggested future reliefs might apply when inherited pensions are used to pay IHT, nothing is confirmed yet.
Wills as tax planning tools
A Will isn’t just a way to pass on assets, it’s a vital tax planning tool. A clear, up to date Will helps:
- Maximise allowances
- Avoid family disputes
- Reduce the risk of higher IHT bills
Without one, intestacy rules could override wishes and push more of an estate into the taxman’s hands.
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