The 2025 UK Budget introduced significant reforms that directly affect inheritance tax planning strategies for families across England and Wales. In this article, we break down the confirmed changes, explain what they mean for ordinary homeowners, and outline practical steps you can take to protect your family’s wealth.
Understanding the implications of these tax changes is not optional — it is essential. With the nil rate band frozen since 2009 and house prices continuing to rise, more families than ever are being caught by inheritance tax (IHT). Here is what you need to know.
Key Takeaways
- Confirmed reforms to inheritance tax in the 2025 UK Budget, including changes to Business Property Relief (BPR) and Agricultural Property Relief (APR)
- From April 2027, inherited pensions will be liable for IHT for the first time
- The nil rate band remains frozen at £325,000 until at least April 2031 — unchanged since 2009
- Practical guidance on navigating the new inheritance tax rules using lifetime trusts and proper estate planning
- Why acting now — rather than waiting — is critical to protecting your family’s assets
Overview of Inheritance Tax in the UK
Inheritance tax is the single biggest threat to ordinary family wealth in the UK today. It is not just a concern for the super-rich — with the average home in England now worth around £290,000, a family home combined with savings and a pension can easily push an estate above the tax-free threshold. England invented trust law over 800 years ago precisely to deal with problems like this — and the tools are still available today.
What is Inheritance Tax?
Inheritance tax (IHT) is a tax charged on the estate of a deceased person. Your “estate” includes everything you own: your home, savings, investments, personal possessions, and — from April 2027 — the value of your pension fund. IHT is charged on the total value of the estate above the nil rate band at a rate of 40%.
The nil rate band (NRB) is currently £325,000 per person. This has been frozen at this level since 6 April 2009 — over 16 years without any increase. It is now confirmed frozen until at least April 2031. To put this in perspective, if the NRB had kept pace with inflation since 2009, it would be well over £450,000 today. This stealth freeze is the primary reason why so many ordinary families are now caught by IHT.
For example, if an individual’s estate is valued at £425,000, the IHT liability would be 40% of £100,000 (the amount above the £325,000 NRB), resulting in a tax bill of £40,000 — payable before beneficiaries receive anything.
Current Inheritance Tax Thresholds
The current thresholds are as follows:
- £325,000 — the nil rate band (NRB) per individual. Frozen since 2009, confirmed frozen until at least April 2031.
- £650,000 — the combined NRB for married couples or civil partners, because any unused NRB from the first spouse to die transfers automatically to the survivor.
- £175,000 — the residence nil rate band (RNRB) per individual, available only when a qualifying residential property is passed to direct descendants (children, grandchildren, or step-children). This is NOT available for gifts to siblings, nephews, nieces, friends, or charities.
- £1,000,000 — the combined maximum for a married couple (£650,000 NRB + £350,000 RNRB), but only if both the NRB and RNRB conditions are fully met.
It is important to note that the RNRB tapers away by £1 for every £2 that the estate value exceeds £2,000,000, so larger estates may lose this allowance entirely.
The Importance of Estate Planning
Proactive estate planning is the most effective way to reduce or eliminate an IHT liability. Doing nothing is itself a choice — and it is a choice that could cost your family 40% of everything above the threshold. As Mike Pugh of MP Estate Planning says: “Trusts are not just for the rich — they’re for the smart.”
Effective strategies include placing your family home into a lifetime trust, making use of the annual gift exemptions, ensuring your will is structured to maximise the RNRB, and — critically — acting well in advance. The 7-year rule for potentially exempt transfers (PETs) means that early action is always more effective than last-minute planning.
Key Considerations for Estate Planning:
- Calculate your total estate value including property, savings, investments, and (from April 2027) pensions — and compare it against the available thresholds.
- Consider placing your family home into a lifetime trust to protect it from IHT, care fees, and sideways disinheritance. A properly structured trust can cost from £850 — roughly the equivalent of one week’s care home fees.
- Use your annual gift exemptions: £3,000 per year (with one year’s carry-forward), plus £250 small gifts to any number of individuals, plus the normal expenditure out of income exemption for regular surplus income gifts.
- Consider charitable legacies — leaving 10% or more of your net estate to charity reduces the IHT rate from 40% to 36%.
Key Changes in the 2025 Budget
The 2025 UK Budget confirmed several significant changes to the inheritance tax regime. These are not speculative — they are confirmed policy changes that will take effect over the next few years. Understanding them now gives you time to plan.
Overview of Confirmed Changes
The key confirmed changes are:
1. Business Property Relief (BPR) and Agricultural Property Relief (APR) — from April 2026: Currently, qualifying business and agricultural assets can attract 100% relief from IHT. From April 2026, 100% relief will be capped at the first £1 million of combined business and agricultural property. Above that, relief will be reduced to 50%. This is a major change for farming families and business owners who have relied on these reliefs to pass on their livelihoods.
2. Inherited pensions — from April 2027: For the first time, unused pension funds and death benefits will be included in the deceased’s estate for IHT purposes. Currently, pensions sit outside the estate entirely. This change could add tens or hundreds of thousands of pounds to the taxable estate for many families, particularly those who have been diligently saving into SIPPs or workplace pensions.
3. The nil rate band freeze extended: The NRB (£325,000) and RNRB (£175,000) are now confirmed frozen until at least April 2031. With inflation and rising property values, this means the proportion of estates caught by IHT will continue to grow each year — a phenomenon known as fiscal drag.
Potential Impacts on Individuals
The combined effect of these changes is significant:
- Ordinary homeowners: The continued freeze on thresholds means a couple whose home is worth £500,000, with £200,000 in savings and a combined £300,000 in pensions, could face an estate value of £1,000,000 — right at the edge of the maximum combined allowance, and only if they qualify for the full RNRB.
- Business owners and farmers: The cap on BPR/APR at £1 million will be a significant blow to family businesses and farms worth more than this. Succession planning needs to be reviewed urgently.
- Pension savers: Those who have been advised to “leave your pension until last” may now face an IHT charge on those funds from April 2027. This fundamentally changes retirement and estate planning strategy.
The need for proactive planning has never been greater. Waiting to see what happens is not a strategy — it is a gamble with your family’s financial security.
Insights from Specialist Estate Planners
Specialist estate planners and financial advisers across the industry are advising clients to act now rather than wait. The key message is clear: review your estate plan immediately, particularly if you hold business assets, agricultural land, or significant pension funds. For broader analysis on the Budget’s impact on inheritance tax, Fidelity’s insights on inheritance tax provide a useful overview.
| Confirmed Change | Potential Impact | Recommended Action |
|---|---|---|
| BPR/APR capped at £1m (100% relief), then 50% above — from April 2026 | Increased IHT liability for business owners and farmers with assets above £1m | Review business succession planning and consider lifetime trusts for business assets |
| Inherited pensions included in estate — from April 2027 | Potentially significant increase in estate value for IHT purposes | Review pension drawdown strategy and consider life insurance trusts to offset IHT |
| NRB and RNRB frozen until at least April 2031 | More families caught by IHT each year due to fiscal drag | Plan now — use lifetime trusts, gift exemptions, and proper will structuring |
By acting now and seeking specialist advice, you can ensure you are well-prepared for these reforms and can minimise the IHT impact on your family.
Changes to the Effective Inheritance Tax Burden
While the 2025 Budget did not change the headline IHT rate itself, the effective tax burden on families has increased substantially through the freeze on thresholds and the expansion of what counts as part of the taxable estate. Understanding this distinction is crucial.
Comparisons with Previous Years
The headline IHT rate remains at 40% on the taxable estate above the nil rate band (or 36% where 10% or more of the net estate is left to charity). This rate has been unchanged for many years. However, the effective rate — the proportion of the total estate that goes to HMRC — has been creeping upwards because the nil rate band has been frozen at £325,000 since 2009, while asset values (particularly property) have risen significantly.
Key considerations include:
- The headline 40% rate remains unchanged, but the frozen thresholds mean more of each estate is being taxed
- From April 2027, pensions being included in the estate will push many families over the threshold for the first time
- The reduction in BPR/APR from April 2026 effectively increases the tax liability on qualifying business and agricultural assets above £1 million
Implications for Taxpayers
For a family with a home worth £400,000, savings of £150,000, and a pension pot of £200,000, the position changes dramatically from April 2027. Currently, the pension sits outside the estate, giving a taxable estate of £550,000. With the nil rate band at £325,000, the IHT liability is £90,000 (assuming no RNRB). From April 2027, the estate value rises to £750,000, and the IHT liability jumps to £170,000 — nearly double — unless action is taken.
This is not a theoretical concern for the super-wealthy. These are real numbers that affect ordinary families across England and Wales. The question is not whether you should plan, but when — and the answer is now.
Making Sense of the Evolving IHT Landscape
Making sense of the evolving IHT landscape requires understanding that the government is raising revenue not by increasing the headline rate, but by freezing thresholds and expanding the scope of what is taxable. This is sometimes called “stealth taxation” and it is extremely effective.
Key steps to consider:
- Calculate your full estate value including property, savings, investments, and (from April 2027) pension funds
- Understand which thresholds you qualify for — the RNRB is NOT automatic and has strict conditions
- Seek specialist estate planning advice — not just general financial advice. As Mike Pugh puts it: “The law — like medicine — is broad. You wouldn’t want your GP doing surgery.”
The Inheritance Tax Threshold: A Closer Look
The inheritance tax threshold is the single most important number in estate planning. Getting it wrong — or assuming it is higher than it actually is — can cost your family tens of thousands of pounds.
Current Thresholds Explained
The nil rate band (NRB) stands at £325,000 per individual. It has been frozen at this level since 6 April 2009 — that is over 16 years. It is now confirmed frozen until at least April 2031, meaning it will have been unchanged for over 22 years. During this period, the average house price in England has risen from around £160,000 to around £290,000. The result is that hundreds of thousands of families who would never have considered themselves “wealthy” now have estates above the IHT threshold.
The residence nil rate band (RNRB) adds £175,000 per person, but only when a qualifying residential property is left to direct descendants — children, grandchildren, or step-children. It is not available for gifts to siblings, nieces, nephews, friends, or charities. For married couples, the combined NRB and RNRB can reach £1,000,000, but only if all conditions are met and the estate is below £2,000,000 (above which the RNRB tapers away).
No Increases on the Horizon
There is currently no proposal to increase the nil rate band or the residence nil rate band. The government has confirmed both will remain frozen until at least April 2031. With property prices rising and pensions becoming part of the taxable estate from April 2027, the number of families caught by IHT will continue to grow each year. For the latest official information on inheritance tax, you can visit the UK Government’s website on inheritance tax.
How This Affects Estates
The impact of the frozen thresholds is cumulative and accelerating. Consider this: in 2009, a home worth £325,000 was comfortably covered by the NRB. Today, that same home might be worth £500,000 or more, leaving £175,000 exposed to 40% IHT — a bill of £70,000. And that is before you add savings, investments, or (from 2027) pensions.
For couples who do not qualify for the RNRB — perhaps because they do not have direct descendants, or because their estate exceeds £2,000,000 — the combined threshold is just £650,000. In many parts of southern England, that barely covers the value of the family home.
The message is clear: do not assume your estate is too small for IHT to apply. Calculate the actual numbers, and plan accordingly. Not losing the family money provides the greatest peace of mind above all else.
Exemptions and Reliefs: What Remains?
Despite the changes in the 2025 Budget, several valuable IHT exemptions remain in place. Understanding and using these effectively is a core part of any estate planning strategy.
Main Exemptions Available
The key IHT exemptions that remain unchanged are:
- Spouse or Civil Partner Exemption: Transfers between spouses or civil partners are completely exempt from IHT, whether during lifetime or on death. There is no upper limit. Any unused NRB from the first spouse to die transfers automatically to the survivor.
- Charitable Donations: Gifts to registered charities are exempt from IHT. Additionally, if 10% or more of the net estate is left to charity, the IHT rate on the remaining taxable estate reduces from 40% to 36%.
- Annual Gift Exemption: You can give away up to £3,000 per tax year without it being subject to IHT. If you did not use the previous year’s exemption, you can carry it forward for one year only — giving a maximum of £6,000 in a single year.
- Small Gifts Exemption: You can make gifts of up to £250 to any number of individuals per tax year, provided you have not used another exemption for the same person.
- Wedding Gifts: Parents can give £5,000, grandparents £2,500, and anyone else £1,000 as a wedding or civil partnership gift.
- Normal Expenditure Out of Income: Regular gifts made from surplus income (not capital) are exempt, provided they form a pattern and do not reduce your standard of living. This exemption has no upper limit but must be carefully documented.
These exemptions are powerful tools, but only if you actually use them. Too many families leave thousands of pounds of annual exemptions on the table every year.
Changes to Reliefs and Allowances
The 2025 Budget confirmed significant changes to two key reliefs. From April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at 100% relief on the first £1 million of combined qualifying assets, with relief reduced to 50% on the excess. For farming families and business owners, this is a fundamental shift that requires urgent planning.
The nil rate band and residence nil rate band remain frozen at £325,000 and £175,000 respectively until at least April 2031. For more detail on how these thresholds work in practice, see our guide on the inheritance tax limit in the UK.
Impact of Changes on Charitable Donations
Charitable donations remain one of the most effective IHT planning tools. The reduced 36% rate for estates that leave 10% or more to charity is unchanged and represents a genuine saving. For example, on a taxable estate of £500,000 above the threshold, the difference between the 40% rate and the 36% rate is £20,000 — money that could either go to HMRC or to a cause you care about.
As you review your estate plan in light of the Budget changes, consider how charitable legacies can form part of a broader strategy that benefits both your family and the wider community. This is one area where good planning can genuinely be a win-win.
Planning Ahead: Strategies for Mitigation
With the NRB frozen until at least 2031 and pensions becoming part of the taxable estate from 2027, proactive planning is no longer optional — it is essential. The good news is that English law provides powerful, well-established tools for protecting family wealth. You just need to use them.
Gift Exemptions and Their Use
Gifting is one of the simplest ways to reduce your estate’s IHT liability, but it must be done correctly and with proper records:
- Annual Exemption: £3,000 per tax year (with one year’s carry-forward). A married couple can give away £6,000 per year between them — or £12,000 if the previous year’s exemptions were unused.
- Small Gifts: £250 per recipient per tax year to any number of people. This cannot be combined with the £3,000 annual exemption for the same person.
- Normal Expenditure Out of Income: Regular gifts from surplus income — for example, paying a grandchild’s school fees or a monthly contribution to a child’s savings — are exempt with no upper limit, provided they are documented and do not reduce your standard of living.
- Potentially Exempt Transfers (PETs): Gifts of any value to individuals become fully exempt if the donor survives for 7 years. If the donor dies within 7 years, the gift uses up the NRB first, with any excess taxed at 40% (subject to taper relief, which reduces the tax rate — not the value of the gift — for gifts made between 3 and 7 years before death, and only where the total value of PETs exceeds the NRB).
Keep detailed records of every gift, including the date, amount, recipient, and the exemption relied upon. HMRC can and does ask for this information.
Trusts as a Tool for Tax-Efficient Planning
Lifetime trusts are one of the most effective tools available under English law for protecting assets from IHT, care fees, divorce, and family disputes. A trust is a legal arrangement — not a separate legal entity — where the trustees hold and manage assets for the benefit of the beneficiaries. England invented trust law over 800 years ago, and it remains the gold standard for estate protection worldwide.
The main types of trust used in estate planning:
- Discretionary Trusts: The most commonly used type, accounting for the vast majority of family trusts. Trustees have absolute discretion over how and when to distribute income and capital to beneficiaries. No beneficiary has a legal right to the trust assets — which is precisely the point. This structure protects assets from creditors, divorce settlements, local authority care fee assessments, and family disputes. Discretionary trusts can last up to 125 years. They are subject to the relevant property regime, but for most family homes valued within the NRB, the entry charge, periodic 10-year charge, and exit charge are all likely to be zero or negligible.
- Interest in Possession Trusts: The income beneficiary (life tenant) receives the income or use of the trust property during their lifetime, while the capital passes to the remainderman (usually the children) when the life interest ends. These are commonly used in will trusts to protect against sideways disinheritance — for example, ensuring that a surviving spouse can live in the family home for life, but the property ultimately passes to the children of the first marriage.
A properly structured trust is not about tax avoidance — it is about tax-efficient planning, asset protection, and ensuring your family’s wealth passes to the people you choose, not to HMRC, a care home, or an ex-spouse’s solicitor.
Specialist Estate Planning Advice
Estate planning is a specialist field. A generalist financial adviser or high-street solicitor may not have the depth of knowledge needed to structure trusts and plan for IHT effectively. As Mike Pugh says: “The law — like medicine — is broad. You wouldn’t want your GP doing surgery.”
A specialist estate planner can help you:
- Run a comprehensive threat analysis on your estate — identifying exposure to IHT, care fees, divorce, and sideways disinheritance
- Structure a lifetime trust tailored to your circumstances, starting from £850 for straightforward cases
- Ensure your will, trust deed, and Lasting Powers of Attorney (LPAs) all work together as an integrated plan
Plan, don’t panic. But do plan — and do it sooner rather than later.
The Role of Digital Assets
Digital assets are an increasingly important part of estate planning, and HMRC treats them no differently from any other asset for IHT purposes. If you own cryptocurrency, digital collections, or valuable online accounts, they form part of your taxable estate.
New Considerations for Inheritance Tax
Digital assets — including cryptocurrency, NFTs, domain names, and online business accounts — must be included when calculating the total value of your estate. Many people overlook these assets entirely, which can lead to unexpected IHT liabilities for their families. Equally, if executors do not know these assets exist or cannot access them, the value may be lost entirely.
Ensuring that digital assets are properly documented in your estate plan — including how to access wallets, exchanges, and accounts — is now as important as documenting property ownership or bank accounts.
Valuation Challenges of Digital Assets
Valuing digital assets for IHT purposes presents unique challenges due to their volatility and the difficulty of establishing market value at the date of death.
| Asset Type | Valuation Challenges | Practical Steps |
|---|---|---|
| Cryptocurrencies | Extreme price volatility; value at date of death may differ significantly from value when estate is administered | Maintain records of holdings, wallet addresses, and exchange accounts. Consider specialist crypto valuation services |
| Digital Collections (NFTs, domains) | Illiquid markets; no standard valuation method | Document all holdings with purchase prices. Obtain professional valuations where significant sums are involved |
| Online Business Accounts | Access may be restricted by platform terms of service; value may depend on ongoing operation | Include access details in a secure document known to your executors and trustees. Consider a digital asset inventory |
Planning for Cryptocurrencies
If you hold significant cryptocurrency, proper estate planning is essential. This means:
First, maintaining detailed records of all holdings, including wallet addresses, private keys, and exchange accounts — stored securely but accessibly to your executors or trustees. Second, considering whether placing crypto assets into a lifetime trust could provide protection and tax efficiency. Third, ensuring your executors or trustees have the technical knowledge (or access to specialist advice) to manage and distribute these assets.
HMRC is increasingly focused on digital assets. Capital gains tax applies to disposals of cryptocurrency, and IHT applies to holdings at death. Ignoring digital assets in your estate plan is no longer an option.
Common Misconceptions About Inheritance Tax
Misunderstandings about IHT are widespread — and they cost families dearly. Here are the most common myths and the reality behind them.
Debunking Myths Surrounding IHT
Myth 1: “IHT only affects the wealthy.” This is the most dangerous misconception. With the nil rate band frozen at £325,000 since 2009 and the average home in England worth around £290,000, a homeowner with modest savings can easily have an estate above the threshold. Add in a pension (from April 2027), and many middle-income families will be caught for the first time.
Myth 2: “If I give my house to my children, it’s out of my estate.” Not necessarily. If you give away your home but continue to live in it without paying full market rent, HMRC treats the property as still part of your estate under the Gift with Reservation of Benefit (GROB) rules — even if you survive more than 7 years. This is one of the most common planning mistakes, and it is why properly structured trusts are essential.
Myth 3: “Gifts are always tax-free after 7 years.” Gifts to individuals (PETs) do fall outside the estate after 7 years. However, transfers into discretionary trusts are Chargeable Lifetime Transfers (CLTs) — not PETs — and are subject to a different regime. And any gift where you retain a benefit (GROB) remains in the estate regardless of how long ago it was made.
Myth 4: “Trusts are only for millionaires.” A family home protection trust can be set up from £850. When you compare that to the potential IHT bill (40% of everything above the threshold) or the cost of residential care (currently around £1,200-£1,500 per week), a trust is one of the most cost-effective forms of financial protection available. That one-off trust setup cost is roughly equivalent to just one week’s care home fees.
Misunderstandings About IHT Calculations
Many people are surprised to learn how IHT is actually calculated. The tax is charged at 40% on the value of the estate above the nil rate band — not on the entire estate. However, the available nil rate band may be reduced by any chargeable lifetime transfers made in the 7 years before death.
| Component | Description | Impact on Tax |
|---|---|---|
| Nil Rate Band (NRB) | £325,000 per person. The first portion of the estate that is tax-free. Frozen until at least April 2031. | Reduces tax liability — but has not increased since 2009 |
| Residence Nil Rate Band (RNRB) | £175,000 per person. Only available when a qualifying home is left to direct descendants. Tapers for estates above £2m. | Can significantly reduce tax — but has strict qualifying conditions |
| Potentially Exempt Transfers (PETs) | Gifts to individuals that fall outside the estate if the donor survives 7 years. If donor dies within 7 years, uses up NRB first. | Can reduce estate value — but 7-year survival is required |
For more detailed information on how inheritance tax and capital gains tax interact on inherited property, visit our resource page for comprehensive guidance.
By understanding the realities of IHT and staying informed about the confirmed changes from the 2025 Budget, you can take control of your estate planning and protect your family from unnecessary financial loss.
Preparing Your Estate for Changes
The changes confirmed in the 2025 Budget are not theoretical — they have specific implementation dates, and the time to prepare is now. Waiting costs money. Every year without a plan is another year of exposure to IHT, care fees, and family disputes.
Steps to Take in Light of the New Rules
Here are the concrete steps you should take:
- Calculate your total estate value: Include your home, savings, investments, life insurance payable to your estate, and (from April 2027) your pension fund. Compare this to your available thresholds.
- Review your will: Ensure it is structured to maximise the RNRB. If you have children from a previous relationship, consider whether an interest in possession trust in your will could prevent sideways disinheritance.
- Consider a lifetime trust for your home: A Family Home Protection Trust can protect your property from care fees, sideways disinheritance, and family disputes — while potentially retaining IHT reliefs including the RNRB. Setup costs start from £850.
- Review your pension strategy: With pensions becoming part of the taxable estate from April 2027, consider whether drawing down pension funds earlier, or placing life insurance into trust, could reduce your overall IHT exposure.
- Use your annual exemptions: Start gifting systematically and keep records. The £3,000 annual exemption, small gifts exemption, and normal expenditure out of income exemption are all “use it or lose it.”
Importance of Regular Will Reviews
A will is not a “set and forget” document. Tax law changes, family circumstances evolve, and property values shift. A will written 10 years ago almost certainly does not account for the pension changes coming in April 2027, the BPR/APR changes from April 2026, or the continued freeze on thresholds until 2031.
We recommend reviewing your will and estate plan at least every 3-5 years, and immediately after any major life event: marriage, divorce, birth of grandchildren, purchase or sale of property, or receipt of an inheritance.
Engaging Specialist Services
The complexity of the 2025 Budget changes means that generic advice is no longer sufficient. You need specialist estate planning advice from professionals who understand the interplay between trusts, IHT, care fee rules, and family protection.
| Service | Description | Benefit |
|---|---|---|
| Comprehensive Estate Review | A full analysis of your estate including property, investments, pensions, and family circumstances — identifying all threats and opportunities. | Understand your exact IHT exposure and the most effective strategies to reduce it. |
| Will Drafting and Review | Professional drafting or updating of your will to maximise available reliefs and protect against sideways disinheritance. | Ensure your will works with current tax law and reflects your wishes. |
| Lifetime Trust Setup | Creation of a tailored trust deed to protect your home and assets. From £850 for straightforward cases. | Protect your family home from IHT, care fees, and family disputes — with a one-off cost equivalent to roughly one week’s care home fees. |
Keeping families wealthy strengthens the country as a whole. By engaging specialist services now, you can ensure your estate is protected against the confirmed Budget changes and whatever may come next.
Case Studies: Understanding the Impact of Changes
The best way to understand the impact of the 2025 Budget changes is through concrete examples. Here are three scenarios that illustrate different aspects of the new rules.
Practical Examples of Estate Planning
- The retired couple with a family home: A couple own a home worth £450,000, have £150,000 in savings, and combined pensions of £250,000. Until April 2027, their taxable estate is £600,000 — comfortably within the combined NRB of £650,000. From April 2027, their estate rises to £850,000. Even with the full RNRB (£1,000,000 combined), they are safe — but only if the home passes to their children and the estate stays below £2,000,000. If they had no children (no RNRB), their combined threshold would be just £650,000, leaving £200,000 taxed at 40% = £80,000 to HMRC.
- The farming family: A family farm worth £2.5 million currently attracts 100% APR — meaning zero IHT. From April 2026, only the first £1 million qualifies for 100% relief. The remaining £1.5 million gets 50% relief, leaving £750,000 taxable. After the NRB, that could mean an IHT bill of £170,000 or more — potentially forcing a sale of land that has been in the family for generations.
- The single parent with a buy-to-let: A single parent owns her home (£350,000) and a buy-to-let property (£250,000), with savings of £50,000. Her total estate is £650,000. With one NRB (£325,000) and the RNRB (£175,000), her threshold is £500,000. The remaining £150,000 is taxed at 40% = £60,000. If she had placed the buy-to-let into a Settlor Excluded Asset Protection Trust years earlier, it would be outside her estate, and her children would receive the full benefit.
Lessons Learned from the 2025 Budget
The 2025 Budget reinforces lessons that specialist estate planners have been emphasising for years:
| Lesson | Description |
|---|---|
| Act Early | The 7-year rule for PETs, the GROB rules, and the care fee deprivation rules all reward early action. Waiting until you “need” to plan is almost always too late. |
| Seek Specialist Advice | The interaction between IHT, CGT, trust taxation, care fee rules, and the GROB rules is complex. Generic financial advice is not enough — you need a specialist. |
| Build Flexibility | Discretionary trusts offer maximum flexibility because trustees can adapt to changing circumstances. The tax rules will change again — your estate plan needs to be robust enough to weather those changes. |
By understanding these lessons and applying them to your own circumstances, you can protect your family’s wealth against both the confirmed Budget changes and future reforms.
Conclusion: Staying Informed on Inheritance Tax
The 2025 Budget has fundamentally changed the IHT landscape for families across England and Wales. The freeze on thresholds, the inclusion of pensions, and the cap on BPR/APR mean that more estates than ever will face a 40% tax bill — unless proactive steps are taken.
Ongoing Education
Tax law changes regularly, and what works today may not work tomorrow. Staying informed about inheritance tax planning developments is not a luxury — it is a necessity. Follow specialist sources, attend webinars, and review your plan regularly.
Resources for Further Information
For financial planning post-budget, we recommend consulting with specialist estate planners who understand the interplay between trusts, IHT, care fee rules, and family protection. MP Estate Planning publishes all its prices transparently — the first and only company in the UK to do so on YouTube — so you know exactly what you are committing to before you start.
Reviewing Personal Circumstances
Every family’s situation is different. Your estate plan should reflect your specific assets, family structure, and objectives. We encourage you to take action now — calculate your estate value, review your will and any existing trusts, and seek specialist advice. As Mike Pugh says: “Plan, don’t panic.” But do plan — because doing nothing is the most expensive option of all.