Beware of inheritance tax reforms

THE CLOCK is ticking on two significant inheritance tax reforms — one's just weeks away, the other following in 2027.

- by Katie Elliott

From April 2026, business and agricultural property relief will be capped at £2.5million per person. Assets above that will receive relief at 50%. For some farming and family business owners, this will be a major shift.

The bigger change lands in April 2027 when unused pension pots are pulled into the inheritance tax (IHT) net. At present, pensions sit outside your estate for inheritance tax purposes, making them one of the most tax-efficient ways to pass on wealth. That advantage is set to disappear.

And the real sting will be the double taxation, says Nick Perrett, founder and CEO of wealth platform Prosper. "If you die after 75, your beneficiaries will pay IHT at 40% on the pension, then income tax at their marginal rate."