With the Autumn Budget expected to increase inheritance tax receipts in the coming years, Triple Point explains why the increased need for estate planning strategies should include investments that use Business Relief for inheritance tax exemption.
According to the very latest estimates published by the Office for Budget Responsibility (OBR), inheritance tax (IHT) receipts are expected to rake in an annual £14.3 billion by 2030. The revised figures were published alongside the Chancellor’s Spring Statement in March this year, and suggest more families will be left facing IHT bills that take a larger bite out of their inheritance. Much of this increase can be attributed to the consequences of last year’s Autumn Statement, where Chancellor Rachel Reeves announced three measures that will boost the Treasury’s coffers.
Frozen tax thresholds have a sting in the tail
First, Rachel Reeves extended the current freeze on IHT allowances from 6 April 2028 to 6 April 2030. This means the nil-rate band stays fixed at £325,000, and the residence nil-rate band continues at £175,000 (with the taper starting at £2 million).
It's worth noting that the nil-rate band has been stuck at £325,000 since 2009. Had it been adjusted annually in line with inflation, it would be worth more than £500,000 today. Similarly, had the residence nil-rate band also been maintained in line with inflation, it would be worth £210,000 today.[1]
Second, the Chancellor also announced plans from April 2027 to include unused pension funds and death benefits within the value of estates for IHT purposes. This is likely to have a significant effect, especially on those that have accumulated large pension pots, thinking this was an IHT-free way of passing on wealth to their loved ones. Similarly, death-in-service benefits paid out by employers have traditionally been entirely separate from personal pensions for the purposes of calculating an IHT bill. Bringing unused pensions and death benefits into those calculations will mean more estates exceed the current IHT thresholds and face a 40% charge on the excess.
Changes to Business Relief thresholds
And third, the Autumn Budget announced changes to Business Relief. As a reminder, through Business Relief, an estate can claim IHT relief on shares in a Business Relief-qualifying company or investment service, provided the deceased owned the shares for at least two years before their death.
Before the Budget announcement, there was no limit on the amount of IHT relief that could be claimed from shares that qualified for Business Relief. However, from April 2026, the first £1 million of Business Relief-qualifying shares held in privately owned companies, will be eligible for 100% relief. Any Business Relief-qualifying assets over £1 million will be eligible for 50% relief (equivalent to an IHT rate of 20%).
Crucially, whereas Business Relief-qualifying companies listed on the Alternative Investment Market (AIM) had previously been eligible for full Business Relief, from April 2026, all AIM-listed shares are only entitled to Business Relief at a reduced rate of 50%.
What should advisers be telling clients?
Although IHT and estate planning is still a relatively small proportion of most advisers’ business, we would argue that the Autumn Budget 2024 has changed this. Clearly, when taken together, these three actions will likely place an additional IHT burden on more estates, which is why the OBR has been revising its estimates for future IHT receipts. For advisers, this represents a major advice opportunity:
No need for advisers or clients to panic
The first thing to remember is that for most clients, time is on their side. Having early conversations with clients about estate planning options should leave them in a stronger position by the time the different measures are introduced. And with more clients likely to be caught up in the IHT net, it makes sense to be talking to more clients about what they want their legacy to be, and how they can initiate or revise their estate plans accordingly.
Straightforward estate planning from Triple Point
Although we don’t provide investment or tax advice, here at Triple Point we think Business Relief can play a critical role in estate planning conversations, particularly among clients with larger IHT liabilities.
However, tax treatment can be complex. It depends upon the individual circumstances of an investor and can be subject to change – for example, tax reliefs always depend on underlying companies maintaining their qualifying status. To help you navigate these complexities, we offer a range of estate planning support for advisers, including CPD-accredited tax planning webinars, digital tools and examples of suitability reports for your clients.
Contact your local Triple Point Business Development Manager for more information.
[1] https://www.blevinsfranks.com/uk-inheritance-tax-breaks-records/
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