With the Autumn budget just days away Today’s Wills and Probate has asked solicitors and estate planners what they are hoping for from chancellor John Healey’s highly anticipated annual statement.
Concerns around succession planning for family businesses, particularly for the farming community and business entrepreneurs, along with the arrival of unused pension pots contributing to taxable estate and inheritance tax (IHT) calculations from April 2027 dominate thinking.
Rumoured proposals for the Bugdet include expectations of state pensions to rise by 3.9% under the confirmed triple lock formula, bringing the new state pensions above £13,000 per year.
Hudda Morgan, partner at Spencer West LLP said she hoped for “certainty for long term planning”.
She said: “People make decisions about pensions, homes, family businesses and farms over a lifetime.
“Changes to inheritance tax can upend those decisions with little chance to adjust. Rules will evolve but should include fair transitional arrangements.”
Morgan emphasised how tax “should not steer people towards particular assets”, adding that elderly people should not have to fear increasing their family’s tax bill by downsizing, noting that “safeguards” should be put in place.
Addressing long-term care, a ring-fenced contribution would be welcomed from the Budget, Morgan continued, to secure a “clear entitlement to good quality care” which also “protects the remainder of people’s estates”.
Nicholas Smith, head of tax at Kinbrook Group’s Duncan & Toplis, said the rumoured proposals could “significantly increase the tax cost of some succession arrangements, potentially exposing business owners to income tax rates of up to 45%, compared with Capital Gains Tax rates of 24%”.
“For many family businesses, succession planning is about preserving a business built over decades and passing it on to the next generation,” Smith said. “Increasing the tax burden could discourage owners from making those decisions or force them to reconsider how and when ownership is transferred.”
Smith emphasised how farmers and other asset-rich businesses will be “particularly sensitive” to these changes, due to significant wealth “often tied up in land, property or business assets” meaning additional tax liabilities could create “serious financial pressures”.
Samantha Leigh, partner at Spencer West LLP commented on the implications IHT tax could have on farmers, saying: “The debate here is less about the IHT payable when a farmer dies, but more about how the changes are already influencing investment decisions, succession planning, and future viability of farming businesses.
“Since April 2026, the first £2.5 million (up from £1 million) of qualifying agricultural and business property can receive 100% IHT relief, and then the IHT will apply at the various rates for any estate worth more than that.
“Although married couples and civil partners can combine allowances to pass on up to £5m tax-free, there are valid concerns about leaving a substantial tax liability to future generations. The threat not only comes from reforms of inheritance tax reliefs, agricultural property relief and business property relief from April 2026, but also unused pension funds and death benefits in a deceased’s estate becoming liable for inheritance tax from April 2027.”
She added: “The issue is that most in the agricultural world are asset rich but cash poor. Many farming enterprises will therefore need to sell the farm in order to pay the IHT on the death of the proprietor farmer.
“It will be interesting to see how the Budget deals with the continuing issues arising from this tax and there is hope across the industry that it is simply scrapped or the threshold is raised to a more realistic level.
Meanwhile Sean Bannister, head of tax at Edwin Coe said he expects to see a relatively “technical” Budget, urging the chancellor to “stop tinkering with tax and start thinking about growth”.
He said: “We’ve reached a point where the complexity itself is becoming a problem. Every new relief, exemption or adjustment creates additional rules that taxpayers and businesses have to understand.
“What businesses and investors really want is some certainty. They need to know what the tax environment is going to look like over the next few years so they can make decisions with confidence. A simpler, more stable system would be a very welcome starting point.”
Changing the tone slightly, Ian Bond, head of legal and in-house legal counsel at Farewill revealed to Today’s Wills and Probate his “worse case scenarios” from the Autumn Budget, with the first being capping the spouse exemption.
Bond said: “Unlimited spousal transfers haven’t always existed. Between 1972 and 1974, they were capped at £15,000. A new cap, like those now on APR and BPR, could mean 40% tax on anything above it when the first spouse dies.”
Secondly, another undesired outcome could be the capping of charity relief, Bond continued.
“This is the one I’d fear most,” he explained. “The government could scrap the reduced 36% rate or cap charitable gifts per estate, targeting philanthropic tax planning by the very wealthy.
“Both are speculative. But recent changes show that long-standing rules can disappear overnight.
“Relying on ‘traditional’ exemptions is no longer a strategy. Early, proactive lifetime planning is essential.”
Commenting on the previously announced IHT changes due to come in place in April next year, Laura Tommis, senior business development manager at ZEDRA said these changes will “significantly reshape estate planning in the UK” and has already affected financial advice being given to clients.
“Pensions have, for many years now, been used as a tax efficient way to transfer wealth to beneficiaries without an IHT charge,” she said. “However, under current government plans set to come into force in April 2027, this will no longer be the case.
“As such, it is important for individuals, particularly those who already have large defined contribution pension arrangements, to reassess their wealth planning, as they may find themselves facing an unexpected IHT liability.
“HMRC estimates that an additional 10,500 people may be subject to IHT following these changes, while 38,500 will pay more IHT than under the current rules.
“As a result, financial advisers are increasingly looking at alternative strategies for their clients. Options such as spending pension assets during their lifetime, structured gifting and Trust planning can provide flexibility while securing and preserving wealth across generations.”
