November 2026
Inheritance tax has been much discussed following the Government’s recent Budget 2026. Although the latest Budget did not introduce major changes to the headline inheritance tax allowances, several important reforms are already taking effect, with further changes due in April 2027.
For homeowners and families wishing to pass their assets to the next generation, it is worth understanding what these changes may mean.
Inheritance tax allowances remain frozen
The standard inheritance tax allowance, known as the nil rate band, remains at £325,000 per person. As before, an additional residence nil rate band of up to £175,000 may be available when a qualifying home passes to children or other direct descendants.
For married couples and civil partners, unused allowances can generally be transferred to the surviving spouse or civil partner. This means that, in appropriate circumstances, a couple may be able to leave up to £1 million free of inheritance tax.
However, these allowances have remained unchanged for many years. As property prices and other asset values increase, more and more families may find that their estates exceed the available allowances, even though they may not consider themselves particularly wealthy.
Pensions and inheritance tax: an important change from April 2027
One of the most significant changes in the Budget 2026 concerns pensions.
At present, most unused pension funds can pass outside the estate for inheritance tax purposes. However, from 6 April 2027, most unused pension funds and pension death benefits will be included when calculating the value of an estate for inheritance tax.
This will make a considerable difference to families whose combined property, savings and pension assets exceed the available inheritance tax allowances.
Importantly, pensions are generally not governed by the terms of your Will. It is therefore sensible to review your pension beneficiary nominations alongside your Will and, where appropriate, seek financial advice.
Changes affecting farms and family businesses
Changes to agricultural property relief and business property relief took effect in April 2026.
Broadly speaking, 100% relief is now limited to a combined £2.5 million of qualifying agricultural and business property, with 50% relief generally applying to qualifying assets above that amount.
These changes are particularly relevant to farming families and business owners who intend to pass valuable businesses to the next generation.
What should you do now?
Not everyone will be affected by the Budget 2026, and inheritance tax planning does not necessarily need to be complicated. However, it is sensible to review your arrangements periodically, particularly if your circumstances have changed or your estate has increased in value.
A properly drafted Will remains an essential part of ensuring that your estate passes to the people you intend to benefit. It is also important to consider how your home is owned, whether your Will still reflects your wishes and whether your pension nominations are up to date.
At Chiltern Wills, we help clients in Buckinghamshire and the surrounding areas put clear, practical arrangements in place for the future. If you would like to make or update your Will, please get in touch.