Inheritance Tax (IHT) has always been one of the UK’s most politically sensitive taxes. It raises relatively modest revenues, yet provokes outsized debate. For families, it represents something far more personal than a fiscal line item: a direct intervention in how wealth, control and legacy are passed from one generation to the next.
Over the past decade, successive governments have tinkered at the edges of the IHT regime. Threshold freezes, new allowances, incremental reporting requirements and increasing scrutiny of reliefs have all added complexity without fundamentally reshaping the system. Now, with continued pressure on public finances and a renewed focus on perceived fairness, attention is once again turning to more meaningful reform.
For high-net-worth individuals, business owners and trustees, the key question is not whether IHT will change, but how to plan sensibly in a system that feels increasingly uncertain.
Why Inheritance Tax is back in the spotlight
IHT currently raises around £9 billion a year and is forecast to rise to £15 billion by 2030. This may be a small proportion of the tax take, yet its reach has widened significantly. Frozen nil-rate bands, rising asset values and greater transparency mean more estates are being caught, often unintentionally.
At the same time, reliefs that have long softened the impact of IHT, particularly Business Property Relief (BPR) and Agricultural Property Relief (APR), have been considerably curtailed. From a policy perspective, these reliefs were seen by some as overly generous, poorly targeted or open to abuse. From a family perspective, they are often fundamental to keeping businesses and land intact across generations.
Add to this the recent changes to the UK’s tax domicile regime, and offshore structures, and it is easy to see why families feel they are navigating shifting ground.
The reliefs targeted
BPR and APR have historically been cornerstones of estate planning for entrepreneurial and land-owning families. In broad terms, they can reduce the value of qualifying assets for IHT by up to 100%, provided strict conditions are met.
However, these conditions are becoming more closely examined. HMRC scrutiny has increased, particularly around:
- Whether a business is genuinely trading rather than investment-focused
- The impact of excess cash or non-qualifying assets
- Ownership structures and control
- Timing of transfers and deaths.
The 100% relief will from 6 April 2026 be capped at the first £2.5 million with assets above this limit receiving 50% relief.
A further blow to families is the withdrawal of 100% exemption on unused pension funds and death benefits. From 6 April 2027 unspent pension pots will be within the scope of IHT. Unsurprisingly the changes have prompted pensioners to run down large pension pots to avoid IHT as the rule change looms. The key risk for families is assuming that historic eligibility guarantees future protection. Reliefs are only effective if structures remain compliant and aligned with current legislation.
Thresholds, freezes and fiscal drag
One of the most significant drivers of IHT exposure is fiscal drag. The nil-rate band has been frozen at £325,000 since 2009. While the residence nil-rate band has added some protection for family homes, its complexity and tapering rules mean it does not benefit everyone equally.
As asset values rise, particularly property and business valuations, more estates are drifting into charge without any change in underlying wealth. This has shifted IHT from something affecting only the very wealthy to a concern for a much broader group of families.
In this context, reform does not necessarily mean higher headline rates. It may come through continued freezes, changes to allowances, or restrictions on reliefs that quietly increase the effective tax burden over time.
Trusts, transparency and compliance
Any discussion of IHT reform must also consider trusts. Trusts remain a powerful planning tool, but they sit within an increasingly complex compliance framework.
The Trust Registration Service, Common Reporting Standard obligations and ongoing IHT charges mean trustees are operating under far greater administrative and reporting pressure than in the past. At the same time, political narratives around transparency make it unlikely that this burden will ease.
Future reform may seek to simplify aspects of trust taxation, but it may also tighten reporting or reduce perceived advantages. Families with long-standing trusts should be particularly mindful of whether those structures still meet their objectives under today’s rules.
International families and the end of old assumptions
For internationally mobile families, the direction of travel is clear. The UK has already moved to a more residence-based system, with reduced tolerance for non doms and offshore trust protections.
Changes to domicile rules have already altered the landscape, and further reform remains a live possibility. For families with cross-border assets, trustees or beneficiaries, IHT exposure can change quickly, sometimes without any obvious trigger.
This makes regular review essential. What worked well five or ten years ago may now create unnecessary risk or complexity.
Planning in a system that keeps changing
Against this backdrop, it can be tempting to delay decisions in the hope of clarity. In reality, waiting often reduces options rather than preserving them.
Effective IHT planning is rarely about aggressive strategies or last-minute fixes. It is about creating flexible structures that can adapt to legislative change, family circumstances and long-term intentions.
That may include:
- Reviewing wills and succession plans regularly
- Stress-testing existing structures against possible reform scenarios
- Ensuring reliefs are robust and defensible
- Planning liquidity alongside tax efficiency
- Aligning tax planning with governance, control and family values
Above all, it requires joined-up advice that looks beyond tax in isolation.
A moment for thoughtful reform, and thoughtful planning
IHT reform is often framed as a binary choice: abolish it or increase it. In practice, the future is more likely to involve gradual reshaping, increased scrutiny and a continued emphasis on transparency.
For families, the challenge is not predicting policy perfectly, but ensuring their planning is resilient. That means understanding where reliefs are vulnerable, where complexity has crept in, and where early action can preserve both wealth and family harmony.
At HaysMac, our Private Client Tax team works closely with individuals, families, trustees and family offices to navigate this evolving landscape. Our specialists in Trusts, Estates and Succession combine deep technical expertise with a clear understanding of the human dynamics behind wealth planning.
If you would like to review your IHT exposure, assess how potential reforms could affect your plans, or simply sense-check whether existing structures still serve their purpose, we would be pleased to talk.
Planning for the future is rarely about certainty, but it should always be about clarity and confidence.
