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The Autumn Budget 2025 has introduced further tax reforms and Inheritance Tax (IHT) is becoming an issue that no longer only effects the wealthy.
With thresholds frozen and reliefs capped, many estates that previously sat below the IHT limit are now at risk of increased tax liabilities.
Reviewing your Will and estate planning has never come at a more important time and you must understand how your finances will be affected.
What IHT reforms has the Autumn Budget introduced?
One of the most impactful changes confirmed in the Autumn Budget 2025 was the continued freeze on IHT thresholds.
The nil-rate band remains at £325,000 and the residence nil-rate band at £175,000 and both will stay frozen until at least April 2031.
While these thresholds remain the same, the growing value of property and investments will pull more estates into the IHT net through fiscal drag.
How has the Autumn Budget affected reliefs?
The Budget has introduced further reforms to the reliefs many business owners and farmers rely on.
Agricultural Property Relief (APR) and Business Property Relief (BPR), which previously allowed qualifying assets to pass free of IHT thanks to a 100 per cent relief, will now be subject to caps.
Following the recent announcement, Chancellor Rachel Reeves has increased the proposed threshold to £2.5 million and values above this may now face a 20 per cent IHT charge.
Couples will now also be able to pass on their unused allowance to a surviving spouse or civil partner, which means that up to £5 million of agricultural or business assets can be free of IHT between them, on top of the existing allowances, such as the nil-rate and residence nil-rate band.
Farmers, business owners, investors and anyone relying on these reliefs are amongst those affected and they must understand how it impacts their current estate planning.
How can the frozen thresholds impact your estate?
The frozen thresholds will mean that more families are facing a potential 40 per cent tax charge on part of their estate.
A family home that has increased in value over time, combined with savings, pensions or business assets, can quickly exceed the available allowances.
It is important to update your Will in line these upcoming tax reforms, especially if they were drafted under the assumption that certain assets would fall outside IHT or benefit fully from reliefs that are now restricted.
If your Will does not reflect the current tax rules, it could unintentionally increase your family’s tax liabilities once you pass.
For married couples or civil partners, they can pass on their unused allowances to their spouse after their death, which means that they could potentially pass on up to £1 million IHT-free.
However, this often relies on correct wording in your Will and appropriate estate planning.
Why should you revisit your estate planning now?
An outdated Will may not account for the current capped reliefs, pension changes or the growing value of property and investments.
This can result in beneficiaries receiving far less than intended once IHT is deduced.
Reviewing your Will is an opportunity to assess how your assets will pass upon death and whether lifetime gifting and trusts remain appropriate.
Many IHT problems can arise from simple oversights, such as misunderstanding the seven-year rule on gifts or relying on reliefs that have since changed.
Early legal advice is crucial to ensure your finances are protected.
A solicitor can help review your Will, assess your current IHT liabilities and update your estate planning to include eligible allowances and reliefs.
We can help advise on trusts, lifetime gifting strategies, succession planning and how to ensure your wishes are carried out tax-efficiently.
If you would like to find out more about reviewing your Will and securing peace of mind for you and your family, please get in touch today.
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