What The New Budget Means For Lifetime Planning Decisions

The recently announced Autumn Budget marked important changes for inheritance tax rules in England and Wales, which may impact your Lifetime Planning decisions. Beverley Bowen, Director and Head of Lifetime Planning – Swansea at JCP Solicitors, explains what these changes mean for you.

Inheritance tax changes

The Nil Rate Band for inheritance tax has been frozen at £325,000 per person until 5 April 2030. Inheritance tax is only paid at 40% of any amount over and above this threshold.

In addition, it is possible to claim further tax relief up to the value of £175,000 through the Residence Nil Rate Band (RNRB). This applies if specific criteria is met, including a direct descendant inheriting the home. For those preparing their Wills, it is helpful to consider how you can satisfy these requirements to save any stress for your loved ones.  

How would this work in practice?

If you inherit an estate which only includes a house which is valued at £500,000, the first £325,000 is tax-free. The remaining amount of £175,000, would be taxed 40%, meaning you would be required to pay £70,000 in tax.

However, if you are inheriting the home as a direct descendent (i.e. if you are the child or grandchild of the deceased) it may be possible to claim the additional RNRB relief on the extra £175,000. This means there would be inheritance tax to pay.

Pensions

Another big change announced in the Budget impacts pensions. Previously, pensions have been a useful tool for mitigating an inheritance tax bill for loved ones. Now, the Government has announced that from 6 April 2027, any unused pension funds and death benefits payable from an inherited pension will fall into the remit of inheritance tax. This means that these values will be added to the rest of the estate.

So, if we consider the above example… You inherit an estate with a home valued at £500,000 and an additional unused pension which has a value of £50,000. You utilise all your available allowances however there is still a balance of £50,000 which would be taxed at 40%. In this case, £20,000 would need to be paid in inheritance tax on the additional inheritance.

On top of this, if the death occurs after the age of 75 then the money would also be subject to the beneficiaries’ rate of income tax – this could lead to a very large tax bill on pension payments.

Business relief for Agricultural Property

From 6 April 2026, agricultural property relief and/or business relief will only apply to the first £1million of an estate’s value. This is in addition to the above allowances. 

For any value over and above this amount, the agricultural property/business property will be able to claim a tax relief of 50%, meaning that you only pay tax at a rate of 20%.

Read more in our Agricultural Property Relief Changes blog here.

AIM investment schemes

Lastly, changes were announced that affect those who invest in Alternative Investment Market schemes (AIM). AIM shares currently qualify for business relief at 100% after being held for 2 years or more. There was discussion about this being scrapped in the new Budget, however, this did not materialise. Instead, the change announced means that from 6 April 2026 any non-listed investments, such as AIM shares, are only eligible for 50% business relief.

For example, if you inherit an AIM share portfolio worth £500,000 after 6 April 2026, and it was held for more than two years by the deceased, then it will be eligible for 50% business relief. This means only half of the value of the AIM shares — £250,000 — will be exempt from inheritance tax. The estate would therefore pay tax at a rate of 40% on the balance of £250,000, (assuming all other allowances had been used in the estate) meaning there would be £100,000 to pay in inheritance tax.

JCP Solicitors’ expert advisors can help with Will reviews and Inheritance Tax reviews for individuals, businesses, and agricultural properties. If you have concerns about any of these changes to inheritance tax law, contact Beverley Bowen on 03333 208644 or email  hello@jcpsolicitors.co.uk