Inheritance Tax in the 2025 Autumn Budget: What Might be Coming?

As the Autumn Budget 2025 approaches, speculation is mounting about whether the new government will turn its attention once again to Inheritance Tax (IHT).

Receipts are already at a record high – £3.7 billion collected in just the first five months of this tax year.

The government has pledged not to raise Income Tax, VAT or National Insurance for working people, leaving wealth taxes like IHT as one of the few levers available to boost revenue.

What changes are being rumoured?

1. Freezing allowances

The nil rate band (£325,000) and the residence nil rate band (£175,000) have been frozen for years.

Rising property values and frozen thresholds have pushed many more families into the IHT net.

It is expected this freeze with continue.

Planning note:

If you are near the threshold, make sure your estate plan still works under current limits- even a modest rise in asset values could push you over.

2.Tightening lifetime gifting rules

The seven year rule- under which gifts made more than seven years before death escape IHT, is under scrutiny.

Some suggested proposals are:

a. Extending the look back period to 10 years

b. Removing taper relief (the gradual reduction in IHT liability over the seven years)

c.  Introducing a lifetime gifting cap on tax free transfers (e.g. £100,000-£200,000)

Planning note:

If you are considering significant gifts, it may be worth acting before the Budget, while the seven-year window and current exemptions still apply.

3. Further restrictions on Business and Agricultural Reliefs

Relief for agricultural and business property have already been narrowed following last year’s announcements. Additional tightening could target:

a.  Passive or investment style business

b.  Lettings within farm enterprises

c.  Complex ownership structure that currently qualify

Planning note

Business owners and the farming community should review shareholdings and structures to ensure ongoing eligibility for relief.

The bottom line

Notably, from April 2027, unused pension funds will begin to fall within the IHT net. This marks a significant shift in how retirement wealth is treated.

Acting before changes are announced is almost always easier than reacting after they take effect so now is the time to review your affairs and focus on effective (and often time sensitive) planning.

At Private Client Solicitors we are specialists in IHT planning. If you would like to discuss further, please feel free to call 0161 509 5020 or email enquiries@privateclientsolicitors.co.uk