With chancellor John Healey announcing a rise in state pensions, new tax allowance for low-income pensioners and pension pots no longer sitting outside the scope of inheritance tax in the Autumn Budget, Today’s Wills and Probate has asked solicitors and estate planners for their thoughts on the changes.
Head of retirement policy at Quilter, Jon Greer has said the new pension tax allowance is sensible, but is also another plaster over the cracks, stating: “protecting pensioners whose total income is no higher than the full new State Pension from being dragged into the tax system is sensible.
“But this policy is also another sticking plaster over the cracks created by years of fiscal drag. The State Pension has continued to rise while the tax-free allowance has stood still, and the government is now having to engineer a workaround to prevent some of the lowest-income pensioners being caught in the middle.”
Mary McCutchan, associate solicitor at WSP Solicitors commented on the lack of clarity around the inclusion of pension funds and pension death benefits, saying: “There has not been enough consultation with tax advisers about the impact these changes will have on clients and their families.
“We still do not have a clear framework for how the new rules will operate when administering estates or advising clients following the death of a loved one.”
Sangeeta Rabadia, partner at Spencer West LLP said although there are many things to celebrate from the Budget, “for those who have spent years building businesses, creating employment opportunities and investing their own capital, the cumulative effect of reductions in tax reliefs, increased inheritance tax exposure, and potentially higher financing costs may feel at odds with the government’s ambition to encourage entrepreneurship and business growth.”
Rabadia continued stating: “It will also be interesting to see how the proposed £10 million Founders’ Relief operates in practice, particularly against the backdrop of restrictions on and reductions in other reliefs available to business owners. Eligibility criteria here will be key to determine the practical value.
“There is a risk that its benefits may be limited to a relatively narrow group of entrepreneurs, while owners of established family businesses and those planning succession face a greater tax burden.
“The key question is whether the new relief will genuinely encourage business creation and long-term investment or whether its benefits will be undermined by restrictions elsewhere in the tax system.”
Commenting on previously announced changes for tax planning due in April 2027 alongside the Budget changes, John Chew, tax, trusts and estate planner at Canada Life said: “It would be a mistake to overlook the raft of changes already scheduled for April 2027. Combined with today’s announcement on higher taxes for savings income, which could mean an effective 20% increase for some savers, the tax landscape is becoming ever more complex.
“The lack of further inheritance tax announcements should not be mistaken for a pause. In just 160 days, unspent pension funds are due to face a fundamental change in their inheritance tax treatment, with potentially significant implications for retirement and legacy planning.
“For many families, this adds another layer of complexity to decisions about how they fund retirement and what they leave behind. There is no need for rushed decisions, but there is a clear need to take advice, understand the options and put a considered plan in place.”
On the impact of the budget high net worth (HNW) individuals, James Ward, partner and head of private client at Kingsley Napley LLP, commented: “Increasing direct taxation on the wealthy is conspicuous by its absence in Healey’s first Budget as chancellor. No increase in Capital Gains Tax rates, one solitary niche mention of Inheritance Tax in the whole Budget document – so no limiting of gifting, no removal of taper relief, no extending the 7-year rule, no removal of excess income relief, no reduction in exemptions.
Ward continued: “Also, no mention of Wealth Taxes, no increase in Mansion tax, no Exit tax from the UK and no increase of Income Tax rates for the higher earners on their employment income.
“He has clearly listened, that the personal UK tax burden is too high and further increases would likely have a detrimental effect.”
Managing director of Frank Smith & Co. Solicitors, Frank Smith, said families need a clear, practical guide on how the changes to pension tax will work in real time, stating: “This includes understanding how pension savings may affect an estate’s inheritance tax liability, how any tax due will be paid and what this means for those administering an estate. Without greater clarity, planning for retirement and deciding how best to pass on savings to loved ones may become more complicated.
“Families and business owners need a tax system that allows them to make long-term decisions with confidence. The Budget provides some welcome short-term support for farmers, but leaves wider concerns about inheritance tax and the transfer of family wealth unresolved.”
On the wider impact on the legal sector, the Law Society welcomed the chancellor’s commitment on early intervention to address problems before crisis point, however say it must include spending on legal aid and early advice.
President, Brett Dixon commented “The extension of graduate visas to two years will allow international talent to contribute more to the UK’s thriving legal sector. On AI, building national capability and cyber resilience is a welcome step, ensuring growth benefits the entire country.
“Although it is positive that the UK government has listened to the Law Society and steered clear of bringing in new taxation on LLPs, it must now take Interest on Lawyers’ Client Accounts off the table once and for all to give the legal sector the certainty it needs.”
“The Budget is a timely reminder for families to review their wills and estate planning, particularly ahead of the planned inheritance tax changes affecting pensions from April 2027.” commented Kirsty Limacher, legal consultant at The Association of Lifetime Lawyers.
“We welcome the fact that no further changes have been made to inheritance tax rates and allowances, providing much-needed certainty for those making long-term financial and tax planning decisions.
“We also welcome the planned change to the Carer’s Allowance “cliff edge” in recognition of the vital role carers play in supporting older people those in vulnerable circumstances, though disappointed to note this won’t take effect until the 2030/31 financial year” she concluded..
