HMRC’s fifth consecutive record year for inheritance tax receipts – £8.5bn in 2025/26 – is a useful prompt for advisers to consider how central estate planning sits within their broader financial planning process.
The original policy intent was to capture only the largest estates. That’s no longer the reality. The nil-rate band has been fixed at £325,000 since 2009 and remains frozen until 2031, while average UK house prices have risen by roughly 80% over the same period. Estates that were comfortably below the threshold a decade ago may no longer be.
The net is also widening. AIM investments will be subject to an effective IHT rate of 20% from 2026, and unused pension pots will be drawn into scope from 2027, changes that extend the conversation well beyond the traditional high-net-worth segment.
A reminder of the main planning options
Each approach involves meaningful trade-offs, and the right solution will depend on the client’s individual circumstances:
· Lifetime gifting can reduce the taxable estate over time but requires clients to permanently relinquish ownership of assets, which isn’t suitable for everyone.
· Life insurance written in trust addresses the IHT liability rather than reducing it and depends on the client’s capacity and willingness to fund ongoing premiums.
· Business Relief allows clients to retain control of their capital while potentially qualifying for IHT relief, though investments of this type carry their own risk profile and liquidity considerations that need careful assessment.
With the threshold freeze set to continue to 2031 and further assets being drawn into scope, estate planning looks set to feature in client conversations with increasing regularity.