Budget 2025: Inheritance Tax Changes Explained
Analysis of the latest inheritance tax changes announced in the 2025 UK Budget and what they mean for your estate planning.
Key Changes Announced
The 2025 Budget included several significant changes to inheritance tax:
- Nil-rate band frozen at £325,000 until 2030
- Residence nil-rate band frozen at £175,000 until 2030
- New rules for inherited pensions (coming into force 2027)
- Enhanced reporting requirements for estates over £1 million
Impact on Estate Planning
The freeze of allowances means more estates will be caught by IHT as property prices and asset values continue to rise. For a typical family home increasing by 5% annually, the effective IHT rate increases over time.
Pension Changes
From 2027, inherited pension pots will be included in the deceased's estate for IHT purposes. This represents a significant change that could affect millions of retirees who viewed pensions as outside their estate.
Action needed: Review your pension beneficiary nominations and consider whether additional planning is needed to mitigate the impact.
What You Should Do Now
- Review your current estate plan in light of the frozen allowances
- Consider accelerating gifting strategies before pension changes take effect
- Ensure your will and beneficiary nominations are up to date
- Explore alternative planning tools such as trusts or life insurance
- Get professional advice if your estate is close to the threshold
Calculate Your Updated IHT Liability
See how the 2025 Budget changes affect your inheritance tax position.
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