Inheritance Tax Planning in 2026: Why Existing Estate Plans May Need Reviewing

Inheritance Tax (IHT) has long been a concern for individuals seeking to preserve wealth for future generations. While many of the core rules remain unchanged, recent reforms and forthcoming changes mean that existing estate plans may no longer be as effective as they once were.

Whether you already have an estate plan in place or have yet to consider inheritance tax planning, now is an ideal time to review your arrangements and ensure they continue to meet your needs and objectives.

What’s Changed and Why It Matters

One of the most significant factors in recent years is not a new tax rate, but the continued freezing of inheritance tax thresholds. The standard nil-rate band remains at £325,000, while the residence nil-rate band remains at £175,000. As property values and asset prices have increased, more families are finding themselves within the scope of inheritance tax, even where they may not have expected to be.

There have also been major changes announced to Agricultural Relief (AR) and Business Relief (BR). Historically, qualifying agricultural and business assets could benefit from unlimited 100% relief from inheritance tax. However, as of 6th April 2026, relief is subject to new limits, meaning some farms and family businesses may face a greater inheritance tax liability than previously anticipated.

Similarly, Alternative Investment Market (AIM) shares, which have often been used as part of inheritance tax planning strategies, no longer offer the same level of relief from April 2026, reducing their effectiveness as an estate planning tool.

Looking ahead, further changes are expected from April 2027, when unused pension funds and certain death benefits are due to be brought within the inheritance tax regime. Given that pensions have traditionally been viewed as an efficient means of passing wealth between generations, this change could have a significant impact on many estates.

Despite these reforms, some longstanding planning opportunities remain available. The seven-year rule for lifetime gifts continues to apply, as do annual gifting allowances, wedding gift exemptions and gifts made out of surplus income.

Reviewing an Existing Estate Plan

For those who already have a Will and estate plan in place, it is important to ensure that those arrangements still reflect both your wishes and the current tax landscape.

Start by reviewing your assets and obtaining an up-to-date picture of your entire estate, including property, investments, pensions and business interests. Significant changes in asset values over time can affect potential inheritance tax exposure.

You should also review your Will regularly, particularly following major life events such as marriage, divorce, the birth of children or grandchildren, or the acquisition of substantial assets. A Will drafted several years ago may not take advantage of available reliefs or reflect current legislation.

Those with farming, business or investment assets should pay particular attention to how the changes to AR and BR relief may affect their succession plans. Early planning, including spousal transfer, may provide greater flexibility and help avoid unintended consequences.

Steps for Those New to Estate Planning

If you have not previously considered inheritance tax planning, there are several practical steps that can be taken to help mitigate a future liability.

Firstly, understand the value of your estate and how it may be affected by inheritance tax. Many people underestimate the combined value of their home, savings, investments and other assets.

Secondly, consider making a Will if you do not already have one. A carefully drafted Will can help ensure your estate is distributed in accordance with your wishes and may help maximise available tax reliefs, such as layered allowances.

Lifetime gifting can also be an effective way to reduce the value of an estate over time. Regular use of available gifting exemptions, together with larger gifts made sufficiently far in advance, can significantly reduce inheritance tax exposure.

In some circumstances, trusts may also form part of an effective estate planning strategy, although these arrangements can be complex and should be considered carefully alongside professional advice.

Seeking Expert Advice

Inheritance tax planning is rarely a one-size-fits-all exercise. Changes to legislation, shifts in asset values and evolving family circumstances can all affect the effectiveness of an estate plan.

Whether you are reviewing existing arrangements or taking your first steps towards estate planning, seeking bespoke legal advice can help ensure that your plans remain robust, tax-efficient and aligned with your long-term objectives.

At SE-Solicitors, our experienced Private Client team can provide tailored advice on wills, trusts, inheritance tax planning and succession arrangements, helping you secure the best possible outcome for both you and your loved ones.

If you have any questions on the issues raised in this article, please get in touch with me, Lucy Gordon, here.