Forthcoming changes to UK inheritance tax rules are set to alter the landscape for investors focused on succession planning, especially those with significant pension savings or exposure to business and agricultural assets. While headline tax rates remain unchanged, the adjustments coming into effect from 2026 and 2027 represent a meaningful shift in the way wealth can be transferred across generations.
Until now, unspent pension savings held within defined contribution schemes have generally fallen outside the scope of inheritance tax, particularly when the pension holder died before the age of 75. From April 2027, however, the government will bring most pension assets within the inheritance tax net. Though beneficiaries will still receive funds tax-free in many cases, the value of the pension will be included in the deceased’s estate for inheritance tax calculations.
In parallel, reforms to business and agricultural relief, due from April 2026, are also narrowing the scope of tax-exempt transfers. The current framework, which allows certain qualifying assets to be passed on with 100% relief from inheritance tax, will be capped at £2.5 million. Beyond that threshold, relief drops to 50%. Crucially, the allowance can be shared between spouses and civil partners, potentially doubling its practical application within a household.
Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.
