Business and pension reliefs are changing

As an act of love, families should act quickly to understand Inheritance Tax (IHT) due to upcoming changes to Business Property Relief and Pensions. This is on top of the recent change bringing the non-UK assets of ‘Long-Term Resident’ non-doms within the IHT net from April 2025.

Sometimes derided as a ‘voluntary levy’, IHT is likely to affect you or someone close to you. Elevated residential property values, frozen allowances and reductions in previously unlimited reliefs look set to upset many baby boomers, particularly in the ‘entrepreneurial’ class.

Many families who may not consider themselves wealthy will still find themselves caught by this tax. Receipts are on a steeply upward trajectory and are projected to hit £13.9 billion by 2029/30. HMRC and the Treasury are fond of stating that only 4% of estates are currently caught, but this proportion is expected to rise significantly (to 7% by 2032). 

To assist with an early assessment of the potential liability a family might face, we have developed an IHT Calculator to support families in assessing potential liabilities.

The calculator aims to provide a simple overview of what IHT liabilities a family might be faced with. The tool does not take into account every possible scenario and has also been simplified in ways which might affect the final liability in some cases; it should therefore not replace professional advice.

For example, gifts with tapering relief complications are not directly accounted for, though such gifts can certainly imply liabilities. In particular, gifts made within three years of the ‘chargeable event’ (usually a death) are fully chargeable. Similarly, questions of whether a person is or is not a ‘Long-Term Resident’ and relief for IHT  in overseas jurisdictions are ignored, as are some of the complexities around the transferable reliefs.    

Crowe’s IHT calculator is therefore primarily intended to help those with simpler affairs; perhaps a house, a spouse, children, maybe a family business, some cash, investments (including ISA and/or second properties), and pension savings. Those with assets under £1 million may (in the right circumstances) find themselves without a liability. However, many families in the £1 million to £4 million bracket won’t be so lucky, especially if there are high value (or multiple) properties, family trading companies, farms or pension and other savings, including ISAs, which are lauded as ‘tax-free’ but unfortunately do not escape Inheritance Tax.  

Comparisons can be made between the current year (2025/26), next year (2026/27, when Business Property Relief is restricted) and the following year (2027/28, when the value of unspent pensions will be brought into the charge). The calculator also shows how charitable giving in a Will can result in an IHT reduction. For many families with standard wills, IHT will impact the senior generation more, with a surviving widow/widower after the first death typically inheriting a Nil Rate Band of (currently) £325,000, as well as a possible Residence Nil Rate Band of up to another £175,000. 

Currently, they will not inherit the £1 million allowance for business or agricultural assets, because this allowance attaches to a person and cannot pass to a surviving spouse/civil partner.

For further information on anything discussed in this insight, please contact your usual Crowe contact.