3rd December 2025

The 2025 Budget and Arthur Conan-Doyle‘s ‘Dog which did not bark’ – Inheritance Tax

There was precious little last week in the budget with regards Inheritance tax and the now more closely aligned subject of the taxation on death of private ‘money purchase’ pension arrangements.

What we did discover was continuing fiscal drag with the Nil Rate Band allowance continuing to be stuck at the level it has been at since 2007, through to at least 2031. The same goes for the newer secondary Residential Nil Rate Band allowance.

The welcome news, to an extent, is the news that the reduced threshold as of end of March 2026 for Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”) attracting assets will become like the Residential Nil Rate Band and the ordinary Nil Rate Band i.e. ‘stackable’/transferrable, so that if unused on first death by reason of the availability of passing to a surviving spouse and spousal exemption applying, the surviving spouse will have up to £2 million worth of APR/BPR relief at 100% available to them/their estate on their own subsequent death.

Whilst of some assistance, potentially, it does not amount to that much as there may well still be merit in diverting such preferentially tax treatment type property on death to a Discretionary Will Trust or alternatively leaving it to the next generation down on the first death so as to legitimately reduce the value in the surviving spouse’s hands as at the date of their subsequent death by reason of the joint ownership discount.

But many of the doomsayers’ predictions simply did not come about, and one must ask why? The answer may be that although Inheritance Tax has traditionally been the Cinderella tax to income tax etc., it is about to become a far more important tax gathering tool for governments with ever increasing receipts over the forthcoming years. Partly, this is because the baby boomer generation is beginning to die holding greater valued assets than any prior generation to them. The Inheritance Tax take will increase because of that. The aggregation of pensions into the inheritance tax net will also assist that aggregated catch. The continued fiscal drag as far as the failure to increase the Nil Rate Band etc. will assist Governments with an increasing tax take.

The good news, however, is that we still have lots of planning tools still available, for now, for those who wish to use them:

  • Gifts of Excess Income to Ordinary Expenditure requirements remain available to us, as long as your documentation is up to scratch to prove the same.
  • We still also have the ability the gift capital ‘without limit,’ if one survives the seven years. The seven-year survivorship period has not been made longer before tax free status is secured. There had been talk of a limit upon the amount that could be gifted away during lifetime and or an increase in the seven years out to say ten years or so.
  • We can still set up trusts for a married couple with up to £650,000 worth of assets every seven years, which when teamed with Capital Gains Tax (“CGT”) holdover being available allows us to plan with assets that may have significant inbuilt positions such as
  • General Investment Account style share portfolios standing at gain;
  • Holiday homes in the UK without principal main residence relief; and
  • Rental property which owners having no need for the income or capital therefrom may have decided to pass down a generation etc.

This is a tax efficient way of doing that, particularly if the underlying beneficiaries are either overage children not earning much taxable income, or grandchildren with otherwise unused personal allowances for the purposes of income being generated for them.

  • We still have accommodation sharing arrangements for large homes when an adult child is in actual occupation with the owner, and that style of living arrangement is a permanent one which is unlikely to alter.
  • We still have ‘open market, leaseback’ arrangements available to families where there is a sufficiently healthy income streams in the older property-owning generation’s hands that they can afford to pay the rent to their children, or better still, perhaps, a trust for the benefit of their young grandchildren.

But for those individuals or couples who ought to be aware that they have an Inheritance Tax liability by reason of their wealth who do not seek and implement appropriate planning steps either, it must be assumed, prefer to hold onto their assets and enjoy those assets, albeit at the risk of a significant Inheritance Tax bill for their beneficiaries as and when the wealthy older generation die, or they are simply unaware of the options which are out there.

That is not to say that the options will be suitable for each and every individual, as for some, they may not be.

It is also not to say that they will not, to an extent, be to a degree of pain for those giving up access to assets, in the form of foregone access to those assets which are the subject matter of the planning. They will henceforth have to make do on the income streams that remain available to them, and/or look to use and use up their stock of underlying capital in the form of pension entitlement, cash at bank, investments and finally perhaps the family home perhaps either by downsizing to a smaller and cheaper property (free up cash and being cheaper to run thereafter), or by freeing up equity by using equity release and using up the resultant cash to supplement income streams in retirement where the same is appropriate.

There is, indeed for all of the above pieces of planning the pain of having to pay for the appropriate professional fees for that planning, but perhaps the costs of that when viewed against the likely Inheritance Tax saving are minimal and a cost worthwhile in paying.

For assistance as to Inheritance Tax planning and, as importantly, a ‘warts and all’ view as to what potential planning works and what does not work, please contact Edward Walter at Buss Murton Law by email ewalter@bussmurton.co.ukor telephone 01892 502 320 for an initial discussion.

Edward Walter

Edward Walter
Partner