The UK Government delivered its Budget on 28 October 2026. While there were no further fundamental changes to the Inheritance Tax ("IHT") regime, the Budget confirmed that the significant reforms previously announced by the Government remain in place and included some targeted technical changes affecting pensions, trusts and estate administration.
Pensions and IHT from April 2027
Perhaps most significantly, there was no reversal or postponement of the previously announced changes to the IHT treatment of pensions.
From 6 April 2027, most unused pension funds and pension death benefits will be brought within an individual's estate for IHT purposes. The change has already been legislated for in the Finance Act 2026 and represents a fundamental shift from the historic treatment of most discretionary pension death benefits being outside an individual's taxable estate.
My previous article on this subject can be found here: Pensions and inheritance tax (IHT) from April 2027 – update | Anderson Strathern.
The Budget does, however, make two technical amendments to the new regime:
- A “prospective personal representative” will be able, where the relevant conditions are satisfied, to direct a pension scheme administrator to pay IHT directly to HMRC.
This is a welcome practical change. Previously, the legislation only allowed executors appointed under a Will to utilise a payment notice under the direct payment scheme. This change should allow those who will be appointed as executor-dative under the Scottish intestacy process to utilise the payment scheme before Confirmation is granted. - The legislation addressed an issue regarding the special 36% reduced rate of IHT where at least 10% of an estate is left to charity.
Those administering an estate will be able to determine whether notional pension property should form part of the "general" component of the estate or constitute a separate component for these purposes. This is intended to avoid unforeseen consequences and potential unfairness that could have arisen from treating the pension as part of the general component.
These amendments will take effect from 6 April 2027.
Agricultural and Business Property Relief
There was also no further change to the recently reformed Agricultural Property Relief ("APR") and Business Property Relief ("BPR") regimes.
From 6 April 2026, the first £2.5 million of agricultural and business property that qualify for 100% relief can continue to benefit from relief at 100%. Relief is generally available at 50% on qualifying property above that threshold. Any unused part of the £2.5 million allowance is transferable between spouses and civil partners.
These reforms therefore remain an important consideration for farmers, landowners and owners of family businesses reviewing their succession arrangements.
Trust liabilities
The Budget also introduces an immediate change concerning liabilities associated with trust property.
The new legislation will clarify when liabilities properly incurred by trustees can be deducted when valuing trust property.
Existing debt deduction restrictions and anti-avoidance provisions will also be extended, including to address arrangements where liabilities funded using value originating from a beneficiary's own estate could otherwise reduce the IHT charge. The changes apply to deaths and other chargeable events occurring on or after 28 October 2026.
What does this mean for estate planning?
The broader IHT landscape therefore remains largely unchanged following the Budget. The major reforms to pensions and APR/BPR remain in place, while the £325,000 nil-rate band and £175,000 residence nil-rate band remain frozen until at least April 2031.
Against that background, individuals should strongly consider reviewing their wills, pension nominations and wider succession arrangements. Business owners and farmers should also consider the impact of the revised APR/BPR regime on existing succession plans. For many families, the interaction between wills, pensions, lifetime planning and the availability of IHT reliefs will become increasingly important.
How we can help
Our Private Client team advises individuals, families, trustees and business owners on Inheritance Tax planning, Wills, trusts and succession arrangements.
We can help you understand how the latest changes may affect your estate, review your existing arrangements and identify opportunities.
If you have any questions about the Budget's implications for your estate planning, please contact Nick Dobbs or a member of our Private Client team.