Recently we were invited to speak at a Synthesis Wealth Management event, at Lansdown Grove Hotel, to impart advice on the upcoming changes to Inheritance Tax (IHT), focussing particularly on pensions and business assets.
Calvin Healy, our Director and Head of Tax, presented the key points that individuals need to be aware of when planning for their future and ensuring control of their legacy.
We’ve summarised Calvin’s presentation into the 5 top things you should know.
#1. Pensions will no longer sit outside your estate
From April 2027, unused pension funds and death benefits will be included in your estate for IHT purposes – increasing most people’s exposure to inheritance significantly.
This represents a major shift: pensions have traditionally been used as tax-efficient wealth transfer vehicles but will now be treated much more like other assets, as a retirement income.
#2. Gifting and income planning are more important than ever
With more assets exposed to IHT, strategies such as lifetime gifting and ‘Normal Expenditure out of Income’ are becoming increasingly valuable as a mitigation tool.
This exemption can be particularly effective, as it is unlimited in value, as long as three key conditions are met:
- the gifting is regular or habitual
- it is made from surplus income (not capital)
- it does not affect your standard of living
When structured correctly, this approach can enable significant wealth transfer while preserving both capital and lifestyle.
#3. Business and investment reliefs are tightening
Changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) mean business owners should review their position carefully, particularly with the introduction of new caps and exclusions.
A new combined cap of £2.5 million limits the level of relief available, and AIM shares will no longer qualify for full relief, removing a commonly used planning route.
As a result, business owners can no longer assume full protection from IHT and may need to consider alternative approaches, such as staged gifting, ownership restructuring, or the use of trusts.
#4. Family Investment Companies (FICs) and trusts are becoming important ways to plan
As traditional reliefs tighten, more people will have structured approaches to wealth planning.
FICs can enable families to transfer future growth while retaining control, often providing flexibility around income and potential valuation advantages.
Trusts, particularly discretionary trusts, can also play an important role, offering opportunities for inheritance tax savings when set up and funded appropriately.
Used together, these structures create an integrated, more beneficial approach to managing and passing on wealth through the generations.
#5. Traditional planning strategies need to change
Long-standing assumptions, such as preserving pensions or relying on certain reliefs, are no longer as effective in the post 2026 IHT environment. A more proactive, integrated approach is now needed, combining income planning, gifting, business structuring and estate planning.
Charitable giving can also form part of this. Leaving at least 10% of an estate to charity reduces the IHT rate on the remaining estate from 40% to 36%, which may be worth considering as part of wider planning.
The key take-away is to move away from isolated strategies and towards a more joined-up, flexible plan.
What action should you be taking?
While every situation is different, some key areas to consider now include:
1. Revisiting your pension strategy: consider whether drawing from pensions earlier may now be appropriate
2. Reviewing beneficiary nominations: ensuring they still align with your intentions
3. Exploring gifting strategies: including use of the 7-year rule and surplus income gifting
4. Considering life insurance: to help manage potential IHT liabilities
5. Reviewing business structures and reliefs: particularly if you are relying on Business Property Relief
Who is this most relevant for?
These changes are particularly important for:
- Individuals aged 50+ with established pension wealth
- Business owners or those with significant shareholdings
- Families looking to pass wealth to the next generation
- Anyone whose estate may be approaching or exceeding IHT thresholds
In summary
As pensions become subject to IHT and some reliefs are reduced, early and ongoing proactive decision-making are increasingly important.
Successful navigation will require a forward-looking, coordinated approach, bringing together tax, financial planning and legal advice, alongside regular review as circumstances and legislation evolve.
Ultimately, adaptable planning and ongoing dialogue with professional advisers will be key to preserving family wealth across generations.
Find out more
If you’d like a copy of the full presentation, have questions or would like to find out more about IHT and your liabilities, why not have a chat with Calvin and his team: hello@richardsonswift.co.uk.
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