In the build up to the Autumn Budget on 26 November 2025, there are further signals coming from the Treasury in relation to inheritance tax (IHT) reform which could fundamentally reshape the way families plan for their future.
The government’s earlier announcements of scaling back agricultural and business property relief (APR and BPR) from April 2026 and bringing pension assets into the IHT net from April 2027 were already cause for concern among private client professionals. However, emerging proposals to tighten or abolish the seven-year gifting rule and limit lifetime exemptions signal a more profound shift.
While presented as targeting “accumulated wealth” rather than “earned income,” these changes would not just affect high-net-worth individuals, but also moderately wealthy families, SME owners and the farming community.
Implications for succession planning
The seven-year rule has long been a reliable mechanism for individuals to reduce their estate’s IHT exposure through potentially exempt transfers (PETs). Its potential abolition or reform would represent a major departure from a principle that has underpinned estate planning for decades.
Many clients have already, in good faith, implemented a strategy of lifetime giving to facilitate intergenerational transfers and succession planning. If they are later subjected to unexpected tax charges or costs of unravelling their estate planning strategies, it risks eroding public confidence in the stability of tax rules.
Of particular concern are family-run businesses and agricultural holdings. These sectors can typically be asset-rich and cash-poor and therefore, rely on phased intergenerational succession supported by reliefs such as APR and BPR and lifetime gifting strategies. Removing these planning tools could trigger forced sales of land or business assets, undermining continuity and potentially breaking apart viable operations.
Practitioners will also recognise the psychological burden placed on clients who face not only increased tax exposure but added uncertainty about how or whether they can pass on their life’s work to the next generation.
Equally troubling is the decision to bring pension assets within the IHT regime from April 2027. For years, successive governments have promoted pension saving as a cornerstone of responsible financial planning, not least because pension pots could be inherited free of IHT under certain conditions. The proposed inclusion of pensions in the IHT net conceivably now raises questions about policy consistency.
Private client lawyers and financial advisers alike will need to rethink long-standing advice around pension preservation and death benefit nominations.
Guidance and next steps
Going forward, these reforms (including those that have been introduced to date and those that have been mooted) place renewed emphasis on private client practitioners to consider their impact with their clients. In particular, private client practitioners should look to:
- Re-evaluate estate plans and gifting strategies already in motion;
- Assess liquidity risks in light of potential reductions in APR/BPR; and
- Prepare clients for scenario-based planning (i.e. appropriate stress-testing of estates under potential new rules);
Industry bodies such as STEP, the Law Society, and CIOT will likely play a critical role in shaping policy through consultation responses and lobbying efforts, particularly on the question of whether these reforms align with broader public and economic interests.
It is vital to remember that tax policy does not exist in a vacuum. Chancellor Rachel Reeves has made sustained growth, investment, and entrepreneurship central to her economic strategy. Yet many of the proposed IHT reforms appear to contradict, not complement her vision. Arguably tax reforms of this nature disincentivise long-term planning, penalise intergenerational continuity and weaken public trust in the tax system.
For reform to be effective, it must support and complement responsible financial behaviour—not punish it. The risk otherwise is that a tax intended to promote fairness ends up undermining social mobility and the very businesses that could promote the UK’s prosperity in the future.
James Cook is a partner in the private client team at Russell-Cooke.
