Inheritance Tax: Key Updates and What They Mean for You

12th December 2025

Ahead of the recent Budget, many feared significant changes; but in reality, only minor adjustments were made. Here’s what stayed the same, what’s new, and what you should be planning for now.

The bad news was that the Inheritance Tax (IHT) thresholds were frozen until 2031, these are:

Nil Rate Band: £325,000
Residence Nil Rate Band: £175,000
Agricultural & Business Property Relief: £1 million

These freezes potentially pull more estates into IHT as property values rise.

There were no changes on the April 2027 introduction of IHT being charged on unused pension values, other than how this will work administratively. This is going to cause a headache for probate work with only 6 months in which to work out the estates IHT and pay it before probate can be applied for. It is being argued that this 6 month period is far too short and needs to be extended, Industry bodies are lobbying for an extension to this deadline.

Finding all a deceased pension ‘pots’ may take some investigation work and be time consuming for executors. It is worth ensuring that you keep a note of all pensions you have paid into in your life, or exploring pension consolidation to help your executors, and aid with estate planning.

One piece of good news for executors is that they can instruct a pension scheme administrator to retain 50% of taxable benefits for up to 15 months. This should give them time to ensure the correct IHT has been settled with HMRC and the estate is not left ‘short’ of funds.

Executors may find taking out loans to pay IHT are cheaper than paying IHT late and suffering HMRC’s interest charges currently charged at 8%.

The other major IHT announcement, although mentioned only briefly in the Budget speech. From April 2026, married couples will be able to transfer any unused portion of the new £1 million agricultural and Business Property Relief allowance, even where the first spouse died before that date. While this does not reverse last year’s major reforms, it is a welcome improvement.

All other aspects of IHT remained untouched, such as the 7 year survivorship period for gifts.

You can read more about IHT planning here: https://whitingsllp.co.uk/inheritance-tax/