The UK’s inheritance tax (IHT) landscape is set for significant change, and as professional advisors, we’re closely monitoring developments and guiding clients through what these reforms may mean in practice.
From 6 April 2027, most unused pension funds and death benefits will be brought within the value of a person’s estate for IHT purposes. Currently exempt, this will pull more estates into the IHT net – creating both challenges and opportunities for donors and charities alike.
The IHT nil rate band – the threshold above which estates are taxed – has been frozen at £325,000 since 2009 and will remain so until at least April 2031. With property prices and other asset values rising over the past two decades, more families are already liable to pay IHT. According to HMRC, annual receipts have grown from £3.3 billion in 2005/06 to a record £8.2 billion in 2024/25.
Adding undrawn pension savings to estates from 2027 will push even more estates over the threshold. Early estimates suggest that 10,500 additional estates will pay IHT for the first time, while a further 38,500 estates will see their tax liability increase. In our practice, we’re already seeing a rise in enquiries about IHT mitigation and succession planning as clients seek clarity and reassurance.
Certain reliefs – such as Agricultural Property Relief (APR) and Business Property Relief (BPR) – can reduce the taxable value of qualifying assets by 50% or even 100%, but qualifying is not automatic. From April 2026, 100% relief will be capped at £2.5 million of combined agricultural and business assets, with any excess receiving 50% relief.
The only unlimited relief available to most individuals is charitable gifting. Donations to UK-registered charities, universities or churches are entirely exempt from IHT. Additionally, leaving 10% or more of your net estate to charity reduces the standard IHT rate from 40% to 36% – providing a clear financial and philanthropic benefit.
Charitable giving – whether during a lifetime, through a will or via charitable trusts – can form an effective part of a broader estate planning strategy. In some cases, a carefully calculated charitable legacy can reduce the overall IHT burden while preserving value for beneficiaries and supporting causes that reflect a client’s values.
We are increasingly discussing the interaction between pension reforms and existing wills; the use of lifetime gifting strategies; trust structures for long-term charitable and family benefit; and the 10% charitable legacy threshold and its impact on the effective IHT rate.
We always recommend individuals take appropriate legal and financial advice before making decisions, ensuring that tax considerations align with wider financial planning and family objectives.
Where charitable ambitions are central, we may also signpost clients to Sussex Community Foundation for local philanthropic support.
For charities and professional advisors working with donors, these changes are likely to prompt more conversations around legacy giving and structured philanthropy.
Clear, responsible communication is key. While charitable gifts can offer tax advantages, they should always be presented within the broader context of personal financial planning and independent advice.
Charities that understand the evolving IHT framework are well-placed to support donors in making informed decisions.
At Mayo Wynne Baxter, we work closely with individuals and charities to navigate the complexities of inheritance tax planning and legacy giving. We’re actively monitoring legislative developments and advising clients on how proposed changes may affect their estates. Our approach is tailored, strategic and grounded in both legal and financial realities.
By reviewing plans early and taking coordinated advice, individuals can ensure their legacy reflects their wishes, supports the causes they care about and protects their family’s long-term interests.
For advisors supporting clients with charitable ambitions, Sussex Community Foundation is the go-to partner for local giving.
We partner with professional advisors to help clients make tax-efficient charitable gifts that are straightforward to manage and create lasting local impact. Through our philanthropy advice, we match our supporters’ aims with the many small, effective local charities – whether through Donor Advised Funds, lifetime gifts or legacies – ensuring their support is directed where it can make the biggest difference.
If you’d like to explore how local giving could support your client conversations, we’d be glad to talk with your team. Get in touch.
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