The Chancellor’s Autumn Budget has sparked a surge in parents passing money on to their children sooner than expected, as more individuals on middle incomes now face potential inheritance tax (IHT) bills.
Rachel Reeves’s proposed changes, including an extended freeze on the tax-free threshold and the inclusion of pensions in taxable estates from April 2027, are expected to double the Treasury’s IHT income by 2030, rising from £7.5billion to £13.9billion.
Charlotte Ransom, CEO of financial advisors Netwealth said: “We’ve seen a significant increase in people bringing forward discussions and exploring tax-efficient ways to pass on their money.”
She noted that many are cashing in the 25 percent tax-free portion of their pension, or “lump sum allowance,” and giving it to their children.
Ms Ransom said: “We’ve seen a four-fold increase in clients doing this.”
The impact of these changes is being felt widely. Robert Salter, a partner at accountancy firm Blick Rothenberg told the i: “Up until recently, so few people paid IHT that the default was you didn’t have to think about it.
“A lot more normal suburban people are going to find they will be paying IHT than before.”
This spike in inheritance planning has affected those with specific types of assets as well.
The new rule applying a 20 percent inheritance tax on agricultural assets over £1 million, starting April 2026, is motivating some families to review their plans.
One financial advisor, who prefers to remain unnamed, described how her friend’s family, co-owners of a farm, are now in “very active discussions about what to do” in light of these changes.
Myron Jobson, senior personal finance analyst at interactive investor noted that, as policies don’t come into effect for a few years, there’s still time for them to be “ironed out”.
However, he noted: “The moves are likely to result in a paradigm shift in retirement planning.
“Previously, it made sense to draw income from pensions last – now people will need to revisit their retirement plans and may change the order of how they access their assets.”
