Inheritance Tax planning: what could change from April 2027?

Inheritance Tax (IHT) planning can be complex, particularly as the rules around pensions and some reliefs are changing.

While many existing allowances and exemptions are expected to remain in place, the way certain assets are treated could affect how much of an estate can be passed on to loved ones.

One of the most significant changes to Inheritance Tax is that, from 6 April 2027, most unused pension funds and pension death benefits will be brought within the value of a person’s estate for IHT purposes. This means that now may be a good time to review your estate plans, pension nominations and wider wealth transfer arrangements.

Below are eight other potential changes to Inheritance Tax from April 2027:

1. The residence nil-rate band could affect how much can be passed on tax-free

The residence nil-rate band may provide an additional allowance when a qualifying home is passed to direct descendants. This can increase the amount that may be passed on free from IHT, although eligibility is not automatic and depends on the value of the estate and other circumstances.

The allowance is expected to remain available after April 2027, subject to the wider freeze in IHT thresholds. However, as pension wealth is brought into scope, some estates may become larger for IHT purposes, which could affect overall planning.

2. Spouse or civil partner exemptions are expected to remain important

Assets can usually be passed to a spouse or civil partner free from IHT. In some cases, unused allowances may also be transferable, which can help couples make use of their combined allowances.

No specific change to these exemptions has been announced from April 2027. Even so, couples may still need to review how their estate is structured to make sure their plans reflect their wider circumstances, wishes and long-term objectives.

3. Lifetime gifting could become a more important part of planning

Lifetime gifting can be a useful part of estate planning. Some gifts may fall outside the estate if the donor survives for seven years, although the rules depend on the timing, value and circumstances of the gift.

Additionally, some gifts can be automatically exempt if within available allowances. For example, an individual can usually give away up to £3,000 each tax year using their annual exemption. If this allowance was not used in the previous tax year, it may be possible to carry it forward for one year, meaning up to £6,000 could be gifted without forming part of the estate for IHT purposes.

No announced change to the seven-year rule is expected from April 2027. However, gifting should be affordable and carefully documented, particularly where the donor may need access to income or capital in later life.

4. Regular gifts from surplus income may help reduce future IHT exposure

Regular gifts made from surplus income may be immediately exempt from IHT if specific conditions are met. This can be particularly useful for people who have income they do not need to maintain their usual standard of living.

There is no announced change to this exemption from April 2027. Good record-keeping is important, as evidence may be needed to show that gifts were regular, made from surplus income and did not affect the donor’s lifestyle.

5. Business and agricultural property reliefs will be restricted

Some qualifying business or agricultural assets can still benefit from IHT relief, but the rules have now changed. These reliefs remain important for business owners, shareholders, farmers and landowners when planning how assets may be passed on.

From April 2026, 100% relief is limited to qualifying business and agricultural assets within the available allowance, with 50% relief applying to qualifying assets above this threshold. Those who may be affected should review their plans to understand how the amended rules could affect their estate and succession planning.

6. Trusts may become more relevant for some estate plans

Trusts can be used in some estate planning arrangements, but they can also come with their own tax charges, reporting requirements and legal responsibilities. For this reason, they should be considered carefully as part of a wider financial and estate planning strategy.

There is no single April 2027 change to trusts, but they may become more relevant for some people as unused pensions are brought into scope for IHT. Specialist advice is important before setting up or changing trust arrangements.

7. Life insurance written in trust could help beneficiaries manage an IHT bill

A life insurance policy written in trust may help provide funds to meet a future IHT bill, provided it is structured appropriately. This can help beneficiaries manage a potential liability without needing to sell assets quickly.

No announced change to this planning option is expected from April 2027. However, affordability, policy structure and suitability should all be reviewed carefully before relying on this approach.

8. Wills and pension nominations may need closer attention

Wills set out how assets should be distributed, while pension nominations guide pension providers on who may receive pension benefits. Both should be reviewed regularly, particularly after major life events or changes in legislation.

As unused pensions become relevant for IHT from April 2027, pension nominations may need closer attention. Outdated wills or nominations could mean wealth is not passed on in line with a person’s intentions.

Why reviewing your plans matters

The upcoming changes to Inheritance Tax do not mean everyone needs to take the same action. The right approach will depend on the value and structure of your estate, pension arrangements, family circumstances and long-term goals.

Reviewing your estate planning now can help identify whether existing arrangements are still suitable, and whether any changes may be needed before the new rules take effect.

Looking for support with IHT or estate planning?

Our free, no-obligation consultation is a great place to start. In your consultation, we’ll take time to understand your financial situation, goals and priorities, before exploring how Attivo’s services could support you.