Why this Budget matters for Wills and estates
The Autumn Budget on 26 November 2025 did not rewrite inheritance tax from scratch, but it confirmed a number of measures that will quietly increase tax on families over the rest of this decade. For private client work the key themes are:
- Inheritance tax (IHT) thresholds frozen until April 2031
- A capped, but now transferable, relief regime for business and agricultural assets
- Pension death benefits clearly drawn into the IHT net, with new powers for personal representatives
- Higher income tax rates on dividends, savings and rental income, and a new cap on salary sacrifice NIC relief
- A “mansion tax” style High Value Council Tax Surcharge on homes worth £2m or more from April 2028
None of this means existing Wills must be torn up, but it does mean that relying on old assumptions – particularly around thresholds, pensions and business reliefs – is increasingly unsafe.
Inheritance Tax – thresholds frozen, gifts unchanged
Nil‑rate bands frozen to April 2031
- The main IHT Nil‑Rate Band (NRB) remains at £325,000.
- The Residence Nil‑Rate Band (RNRB) remains at £175,000.
- Both are now frozen until at least 5 April 2031.
- The RNRB taper threshold stays at £2m, so estates above that level lose the RNRB gradually and can lose it completely.
With property and investment values rising and thresholds static, more estates will fall into IHT and more couples will be caught by the £2m taper. Estate values that felt comfortably below the line a few years ago may now be much closer to, or over, the thresholds.
Lifetime gifts – no new restrictions
Rumours of restrictions on lifetime gifting (such as caps on overall gifts, longer “7‑year rules” or IHT on all lifetime gifts) have not materialised. The existing regime remains:
- The 7‑year rule continues for most outright gifts.
- The £3,000 annual exemption and small gifts exemption continue.
- Wedding/civil partnership gift exemptions remain.
- The exemption for regular gifts out of surplus income survives, provided the statutory conditions and record‑keeping are satisfied.
In a world of frozen thresholds, sensible lifetime giving is now more important than ever. Regular use of the annual exemption, and structured gifts from surplus income, can reduce the ultimate IHT bill without compromising the donor’s security – but only if the Will and the overall plan are aligned.
Business and agricultural property – £1m cap and transferability
From 6 April 2026 a combined £1m allowance for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) will apply. Above that £1m cap, qualifying assets may still attract IHT relief, but typically at 50% rather than 100%.
Crucially, the Autumn Budget confirms that:
- Any unused part of the £1m allowance will be transferable to a surviving spouse or civil partner; and
- The transferability will apply even if the first death occurred before 6 April 2026.
This corrects a significant anomaly in last year’s proposals, where the allowance was not transferable at all. For farming and business families it reduces the pressure to force assets away from a surviving spouse purely to “use” an individual allowance on first death.
However, for couples whose combined APR/BPR‑qualifying assets exceed £1m, the cap will still bite. Existing Wills and structures that assume uncapped 100% relief, or that were drafted before the transferability change, should now be reviewed alongside partnership agreements, shareholder agreements and any existing trusts.
Pensions – inclusion in IHT and new powers for personal representatives
Pensions have been moving steadily into the inheritance tax landscape. The Budget confirms that from 6 April 2027 most unused funds in defined contribution pension schemes will be treated as forming part of the member’s estate for IHT purposes, subject to the usual spouse/civil partner exemption where relevant.
A key practical change is that:
- Personal representatives (executors/administrators) will be responsible for reporting the IHT position on pension death benefits; and
- They will be able to direct pension scheme administrators to withhold up to 50% of taxable pension funds for up to 15 months from the date of death and to pay the IHT due on those funds directly to HMRC before the balance is released to beneficiaries.
This does not apply to exempt benefits (for example, those passing to a spouse or civil partner), to funds under £1,000, or to continuing annuities. It does, however, mean that for larger pension pots there may be delays before beneficiaries receive full payment, and executors will have a more hands‑on role with pension providers.
In practical terms, pension death benefits must now be considered alongside the Will:
- Beneficiary nominations/expressions of wishes should be checked and updated.
- The intended allocation of tax between the estate and pension beneficiaries should be thought through.
- Executors should be chosen and briefed with this increased responsibility in mind.
Income tax, savings, rental income and salary sacrifice – knock‑on effects
Increased tax rates on dividends, savings and property income
The Government has not increased the main earned income tax rates, but has targeted savers, investors and landlords:
- From 6 April 2026, dividend tax increases to 10.75% (basic rate) and 35.75% (higher rate); the additional rate remains 39.35%.
- From 6 April 2027, savings and property income will be taxed at 22% (basic rate), 42% (higher rate) and 47% (additional rate).
Income tax and National Insurance thresholds remain frozen until April 2031. Over time, this will pull more people into higher tax bands through “fiscal drag”, including many clients who do not see themselves as high earners.
For private client planning, these changes affect how families structure ownership of investments and rental properties and how much net income is available for lifetime gifting.
Salary sacrifice cap for NIC purposes
From 6 April 2029, the NIC advantage of salary sacrifice into pensions will be capped:
- The first £2,000 per year of contributions made via salary sacrifice will still benefit from employer and employee NIC relief.
- Contributions above £2,000 will be subject to NICs in the usual way.
- Normal employer pension contributions (not made via salary sacrifice) remain fully exempt from NICs and income tax relief on pension contributions is unchanged.
Private sector employees who heavily use salary sacrifice will be most affected. Changes in take‑home pay may in turn influence the level and timing of any lifetime gifts or pension‑versus‑ISA decisions, which should be factored into estate planning discussions.
Capital Gains Tax – rates unchanged, allowances frozen
CGT rates remain at 18% (basic rate band) and 24% (higher/additional rate) for most assets. The annual exempt amount stays at £3,000 for individuals and £1,500 for most trusts and is frozen until 5 April 2031.
There are some technical changes to incorporation relief and share reorganisation/share‑for‑share exchange relief, tightening existing anti‑avoidance rules. These mainly affect corporate transactions and are less central to typical wills and probate work, but they are important for clients planning business restructurings alongside succession planning.
For most individuals, the key point is that with a very low annual exemption, more disposals will trigger CGT and greater care is needed over timing, ownership and phasing of disposals, especially when reorganising property or investment portfolios in anticipation of later life or death.
High Value Council Tax Surcharge – the “mansion tax”
From 1 April 2028, the High Value Council Tax Surcharge (HVCTS) will apply to residential properties in England worth £2m or more on a sliding scale:
£2m to < £2.5m – £2,500 per year
£2.5m to < £3.5m – £3,500 per year
£3.5m to < £5m – £5,000 per year
£5m and above – £7,500 per year
The surcharge will be collected by local authorities in addition to standard council tax and passed to central government. Identification of affected properties is expected to involve revaluing properties currently in higher council tax bands.
For private client work, the key issue is affordability and practicality in the next generation. Beneficiaries inheriting high value homes will face higher annual running costs alongside potential IHT liabilities. For some families this will strengthen the case for downsizing or selling in lifetime, or for balancing inheritances so that one child is not left with a property they cannot realistically afford to keep.
Non‑doms, offshore trusts and FIG regime – specialist territory
The Budget also introduces further technical amendments to the Foreign Income and Gains (FIG) regime, the Temporary Repatriation Facility and the inheritance tax treatment of certain former excluded property trusts, including a £5m cap on relevant property regime charges in any 10‑year period for some trusts.
These changes affect a relatively small group of clients with significant offshore assets and trust structures and are highly fact‑specific. Anyone with historic non‑dom status, offshore trusts or substantial overseas assets should seek specialist advice to understand how the evolving regime interacts with their Wills and succession plans.
Practical next steps for clients
In light of the Autumn Budget 2025, it is sensible to consider the following:
- Review your Will – particularly if it predates the Residence Nil‑Rate Band or assumes older APR/BPR rules or unlimited pension freedoms.
- Calculate a realistic estimate of your estate, including pensions, business/farming assets and life policies, to see how close you are to the IHT and RNRB thresholds.
- Check your use of lifetime exemptions – especially the £3,000 annual exemption and the surplus income gifting exemption – and keep clear records.
- Align your pension nominations and expressions of wishes with your Will and any trusts, bearing in mind the new IHT reporting and withholding powers for executors.
- If you own a business, farm or high‑value property, review your Wills, partnership/shareholder agreements and any trusts together so that they make best use of the revised reliefs and take account of the HVCTS.
- Ensure your chosen executors and attorneys understand the role, particularly where there are complex assets or vulnerable beneficiaries.
How we can help
The combined effect of frozen thresholds, changing reliefs and the evolving treatment of pensions and business assets is that assumptions made even a few years ago may no longer hold true.
We can:
- Analyse how the current rules apply to your specific estate and family circumstances;
- Redraft Wills and letters of wishes so that they work coherently with pensions, business structures and lifetime gifts;
- Advise on appropriate use of trusts, lifetime giving and reliefs such as APR and BPR; and
If you would like to review your Will, your estate plan or the likely impact of the Autumn Budget 2025 on your family, please contact our Wills and Probate team on 0345 646 0406 or complete our online enquiry form.