Autumn Budget 2025: Key Changes to Inheritance Tax and What They Mean for Your Estate Planning

On 26th November 2025, Chancellor Rachel Reeves presented the Autumn Budget, which brought several important changes that could affect your estate planning. As private client solicitors, we are dedicated to ensuring that your will and estate plans remain up to date, tax-efficient, and in line with the latest legal developments. The changes introduced in this year’s budget are significant and it is crucial to review your estate plan to ensure it reflects these updates.

Outlined below are the key changes to Inheritance Tax and why it is now more important than ever to revisit your arrangements with us.

1. Inheritance Tax Thresholds Frozen Until 2031

The government has confirmed that the Nil Rate Band (the amount you can pass on without incurring Inheritance Tax) and the Residence Nil Rate Band (which applies to your family home) will remain frozen at £325,000 and £175,000 respectively until April 2031.

While this might seem favourable initially, the freeze means that these thresholds will not increase in line with inflation. As property values and other assets rise, this could lead to a higher Inheritance Tax liability, as the value of your estate may exceed these limits. For example, any value above the thresholds will be subject to an Inheritance Tax rate of 40%.

Given the impact of this freeze, it is crucial to review your estate plan. Regular reviews can help ensure that your assets are structured to mitigate Inheritance Tax, whether through strategic gifting, trusts, or other planning methods.

2. Business Property Relief and Agricultural Property Relief: Changes to Transferability

The Autumn Budget introduced a welcomed change regarding Business Property Relief (BPR) and Agricultural Property Relief (APR). These reliefs allow for a 100% Inheritance Tax exemption on qualifying business or agricultural assets, making them crucial for families with businesses or farms.

Previously, the new £1 million BPR and APR allowance, due to take effect in April 2026, was not transferable between spouses or civil partners. This meant that if one partner did not use the full £1 million relief, the surviving spouse could not inherit the unused portion.

Now, the £1 million BPR and APR relief will be transferable. This means that the surviving spouse or civil partner can apply the unused allowance to their own estate, potentially allowing them to benefit from a £2 million exemption on their death. This change offers greater flexibility in estate planning, reducing the urgency to use the allowance on the first death.

If your estate includes business or agricultural assets, it is important to review your estate planning arrangements to ensure these reliefs are fully utilised.

3. Pension Funds and Inheritance Tax: New Reporting and Withholding Requirements

Another significant change concerns pension funds. From 6th April 2027, most unused pension funds and death benefits will fall under Inheritance Tax rules. This means that pension assets will need to be reported and taxed according to the same principles that apply to the rest of your estate.

To help manage this, personal representatives will now be able to instruct pension scheme administrators to withhold up to 50% of taxable pension benefits for up to 15 months after death. This withholding will cover any potential Inheritance Tax liabilities, ensuring that the tax can be settled before assets are distributed to beneficiaries.

If you have significant pension assets, it is vital to review how these will be managed as part of your overall estate planning. We can help ensure that your pension arrangements are properly structured to minimise Inheritance Tax exposure.

4. Regular Estate Planning Reviews: Why They Are More Important Than Ever

The changes introduced in the Autumn Budget highlight the importance of regularly reviewing your estate plan. The freeze on Inheritance Tax thresholds, updates to Business Property Relief and Agricultural Property Relief, and the new treatment of pension funds all have the potential to significantly impact your estate’s Inheritance Tax position.

Even small adjustments to your gifting strategy, tax reliefs, and estate structure can reduce the tax burden on your estate. Our team can ensure that your arrangements are optimised and in line with the latest tax rules.

5. Infected Blood Compensation Payments: Inheritance Tax Exemption

One of the most notable changes in the Autumn Budget 2025 is the exemption from Inheritance Tax for all compensation payments from the Infected Blood Compensation Scheme. Previously, compensation payments made to victims or their families could trigger Inheritance Tax, particularly when the original recipient passed away before receiving the payment.

Thanks to extensive campaign efforts, this issue has now been addressed. From 26th November 2025, compensation payments made to the first living recipient of a deceased victim will be exempt from Inheritance Tax. Furthermore, recipients will have two years to make gifts of the compensation without incurring any Inheritance Tax charge (this rule applies from 4th December 2025).

If you or a family member are impacted by this scheme, it is crucial to review your estate plan to ensure the compensation is handled in the most tax-efficient manner. We can help you navigate this process and minimise any potential tax implications.

What to do next...

The changes introduced in the Autumn Budget 2025 provide an opportunity to reassess your estate plan and make sure it is optimised for the new tax rules. From the freeze on Inheritance Tax thresholds to the new transferability of Business Property Relief and Agricultural Property Relief, and the revised treatment of pension funds, these developments could have a significant impact on your estate and the taxes due upon your death.

We are here to help you navigate these changes and ensure that your estate is structured in the most efficient way possible. If it has been a while since you reviewed your Will, or if you have concerns about how the recent changes may affect your estate, please do not hesitate to contact us. We are here to help you protect your legacy and ensure your loved ones are provided for in the most tax efficient way.