Budget 2026: What Does It Mean for Your Will, Estate and Inheritance Tax?
The Chancellor's Budget on 28th October 2026 introduced several changes that may affect your estate planning, inheritance tax liability and the administration of your estate. Although the Budget was less wide-ranging than previous announcements, there are important developments to consider, particularly if you have significant pension savings or assets held in trust.
Pension savings and inheritance tax
One of the most significant changes is the inclusion of most unused pension funds and pension death benefits within the scope of inheritance tax for deaths occurring on or after 6th April 2027.
Previously, pension arrangements could offer opportunities to pass wealth to beneficiaries outside the scope of inheritance tax. Under the forthcoming changes, more estates may face an inheritance tax liability, making it increasingly important to consider your pension arrangements alongside your will and wider estate plan.
The changes may also create practical challenges for executors, particularly where inheritance tax must be paid before estate assets can be accessed. Reviewing your arrangements in advance can help identify potential tax liabilities and funding issues.
Changes to pension death benefits
The Budget also removes the two year rule for certain pension lump sum death benefits from 28th October 2026. This means beneficiaries will not lose their favourable tax treatment simply because the payment takes longer than two years, provided the other conditions are met.
However, inheritance tax and income tax are separate considerations, and both may need to be assessed when dealing with pension benefits following a death.
Trusts and inheritance tax
New rules are also planned to clarify how liabilities and debts are treated when calculating the inheritance tax value of trust assets. These changes may affect arrangements where borrowing or other liabilities are intended to reduce the taxable value of property held in trust.
If you have an existing trust, or are considering establishing one as part of your estate planning, it may be worth reviewing the arrangements to understand whether the changes could affect you.
Property and estate planning
The government has confirmed plans to introduce a High Value Council Tax Surcharge from April 2028 for residential properties in England valued at £2 million or more. The annual charge is expected to range from £2,500 to £7,500, depending on the property's value.
Although this is not an inheritance tax, it may be relevant if you own a high value property or hold property through a trust.
Reviewing your estate plan
The Budget highlights the importance of ensuring that your will, pension arrangements and wider estate planning work together effectively.
We recommend reviewing your existing arrangements, particularly if you have substantial pension savings, trust assets or a significant property portfolio. Taking advice now may help you understand the potential impact of the changes and identify whether any adjustments to your estate plan are appropriate.
If you would like advice on your will, inheritance tax planning or the administration of an estate, our Private Client team will be happy to assist.