Are you ready for the Budget’s Inheritance Tax reforms?

This is the third of a series of articles analysing details of the recent Autumn Budget statement and the impact these measures will have on family businesses, future generations and those looking for tax efficient investments.

Reforms to Inheritance Tax (IHT) stand out as one of the biggest and most impactful long-term shifts from the 2025 Budget. Rather than tinkering at the edges with thresholds and allowances, these changes fundamentally change how families pass on businesses, pensions, and assets.
 
Business owners (particularly older ones) need to understand the new rules and how they change their options for the future. The golden rule is to prepare early so you’re not caught off guard. In this article, we’ll tell you more.

Business Property Relief changes kick in

Changes to Agricultural and Business Property Relief were announced in last year’s Budget, but have yet to come into force. Barring any last-minute reversal – they were highly controversial, after all – the changes begin in April 2026.

For family business and farm owners, there are dramatic implications which need clarification. Owners want to understand how their successors will fund any IHT liability attached to their assets. Deferral schemes can help with timing, but do not eliminate the bill. Succession will require more planning, and in some cases, the shareholding structure will need to change.

There is also a wider unease about the financial problems the next generation might face. Children could inherit a business and a sizeable tax bill at the same time. While some business owners and families are reviewing their structures based on earlier budget proposals, others prefer to wait for the final rules before taking irreversible steps.

Pensions are part of estates from 2027

From April 2027, most unused private pension funds and death benefits will be considered part of a deceased person’s estate. Therefore, they will count towards the person’s inheritance tax threshold and could be subject to a 40% IHT charge, depending on the overall value of the estate. Previously, these pension funds were exempt.
 
It represents a major shift in how families will plan for their long-term future. It may be beneficial to adjust your contributions or use other financial vehicles to balance your current tax efficiency with future exposure.

However, a lot can happen between now and April 2027. It may pay to hold your fire for now, so you don’t have to alter your plans again if the final legislation changes.

Are changes to gifting rules on the way?

Current laws allow unlimited gifting, with assets staying part of the giver’s estate for 7 years. During the lengthy period before the Budget, when there was much speculation and kite-flying in the media, there was talk of extending this period to 10 years.

Business owners and their families now have extra questions to consider:

• Should they gift assets now before the rules change to their disadvantage?
• How would it affect their plans if the rules shift from 7 to 10 years?
• Can they afford to give up assets earlier?
• What happens if the political direction of travel shifts again?

While it pays to get ahead of potential reforms before the crowd, you must consider whether you want to make changes you can’t reverse if you need to.

Consultants are seeing an uptick in interest in life insurance as a way to mitigate IHT risk. Insurance appeals to business owners who want to manage future exposure to IHT without getting into the areas of gifting or restructuring their business. It offers a straightforward way to cover a liability you know will arise one day, especially when the rules are in flux and you want clarity.

Start your succession planning early

When you combine the effects of BPR reforms, pensions becoming part of estates and gifting uncertainty, it’s undoubtedly a challenging time to be planning your family succession. You see planning windows tightening, want to look further ahead, but are wary of moving too soon. Business owners and their families feel this tension more than most.

The best policy is to bring succession planning into your overall financial strategy – and do it early. Think of your succession the way you think about your investment strategy or tax plans. That way, you’ll be better placed to protect your current position while supporting the next generation. The rules may change over time, but the need for joined-up thinking is clear.

Accentuate by K3 Hub – The Autumn Budget: a comprehensive analysis

On Monday 1st December 2025, we held an Autumn Budget webinar at which our keynote speaker, Jeremy Mindell, Director at Primondell Ltd, analysed the details of the statement and provided a comprehensive overview of the latest economic and public financial outlook.
 
Jeremy was joined by a panel of experts discussing the economy, the deals market, stealth taxes and other measures affecting businesses and private individuals.
 
The panel included:
 
Kelly Mitchell
Managing Director, Restructuring & Insolvency
Quantuma
 
Ian Barton
Managing Director, Corporate Finance
Quantuma
 
Marcus Pilkington
Chartered Financial Planner
Pareto
 
Holly Bedford
Managing Director, Tax Advisory
K3 Tax Advisory Limited