The UK government’s upcoming IHT changes are causing quite a lot of confusion among pensioners and we hope this article helps shed some light on the situation. These reforms are all set to affect pensions, agricultural land, and business properties. Many high-net-worth individuals may need to rethink their financial strategies to avoid unexpected tax bills.
Pensions No Longer Exempt
From April 2027, pensions will be included in the value of an estate for IHT purposes. Previously, unused pension funds were exempt, making them a popular tool for passing on wealth. With this change, any pension funds left behind will now face a 40% tax if they exceed the IHT threshold. This could significantly impact retirement planning.
Changes to Agricultural and Business Relief
The government is also revising tax relief on agricultural and business properties. From April 2026, a 20% levy will apply to agricultural land holdings over £1 million. Additionally, business and agricultural property relief, which currently offers up to 100% exemption, will be capped at 50% for high-value assets. These changes could increase tax liabilities for landowners and business owners.
Longer Gifting Period
Another proposed reform is extending the current “seven-year rule” for tax-free gifts to ten years. Under the new rule, individuals would need to survive for a decade after making a gift for it to be IHT-exempt. This shift could complicate estate planning and force people to give away assets earlier than planned.
How Will This Affect You?
These upcoming IHT changes are pushing many high-net-worth individuals to rethink their estate planning. Some may look for ways to reduce their taxable estate, while others may consider relocating to countries with more favorable tax policies.
For those with pensions above the threshold, transferring retirement savings abroad through a QROPS could provide tax advantages and long-term financial security. With the UK tightening its rules, now may be the right time to explore alternative pension solutions before these changes take effect.