Budget jitters are prompting spike in inheritance tax planning requests, financial experts reveal

BUDGET jitters are prompting a spike in inheritance tax (IHT) planning requests, financial experts have revealed.

The main nil-rate band (£325,000) has been frozen since 2009, while the residence nil rate band (£175,000) is also frozen. 

Both are set to remain at current levels until at least 2030, meaning more and more families are being dragged into the IHT net each year as property values and asset prices rise.

At the same time, the planned changes to the IHT treatment of pensions — described by some as a “raid on pensions” — have unsettled those who had viewed pensions as a tax-efficient way to pass wealth to loved ones.

Scott Gallacher, Director at Leicester-based Rowley Turton, said advisers are already seeing more client enquiries as people look to review their estates, make use of allowances while they can, and explore planning options such as gifting, trusts, and business reliefs.

He added: "The good news is many families don’t realise that up to £1 million can be exempt for a married couple with children, so some may be worrying unnecessarily. But for others, the 2027 inheritance tax changes on pensions could create six-figure liabilities almost overnight. 

“That’s why both advisers and clients are being far more proactive with inheritance tax planning than ever before. With the right steps, these potential liabilities can often be significantly reduced — or even eliminated entirely, saving hard-working families tens or even hundreds of thousands of pounds.”

Ross Lacey, Director & Independent Financial Adviser at Rayleigh-based Fairview Financial Management, said many people are confused as to how they will be affected.

He continued: "We've been getting increased enquiries around inheritance tax planning. Many people don't know whether it will impact them and their family or not, so part of the initial conversation is identifying this. 

"There's certainly speculation the Budget might take away or tighten up some of the exemptions like gifting, gifting out of regular income and the way in which even a failed potentially exempt transfer can immediately reduce IHT through gaining back the residence nil rate band."

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said he expects demand to rise further.

He added: "We’ve seen a definite uptick in IHT-related conversations as the Budget looms. The frozen thresholds are dragging more middle-class families into the net each year, people who never thought inheritance tax would affect them.

“The proposed pension changes have only heightened concern, because pensions were often seen as a safe, tax-efficient way to pass wealth on. Now clients are asking about gifting strategies, the use of trusts, and business relief more than ever before. I expect demand to rise further after the Budget, uncertainty always fuels planning, and right now the IHT landscape feels more like a trap than a tax.”

Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, said the frozen thresholds are causing headaches.

He continued: “Many clients still don't understand inheritance tax but most have an opinion on whether they want to pay it or not. The frozen thresholds pour salt in the wound as if they had kept pace with the cost of living, the base nil-rate band would be over half a million pounds today. 

"It looks inevitable that tax rises are coming in the budget to fund increased government spending. We still have another 18 months before unused pensions count within the estate and I think the government have underestimated the revenue they'll raise from this, which comes at families expense.”

Kundan Bhaduri, Entrepreneur and Landlord at London-based The Kushman Group, said house price rises are dragging many people into having to pay IHT.

He added: "Property appreciation has dragged ordinary homeowners into punitive brackets which was once designed for the wealthy. The pension raid from 2027 adds insult to injury, treating retirement savings as government revenue rather than family legacy. 

"A modest family home bought for £200,000 in 2009 now approaches £450,000 in many areas, while occupational pensions accumulated over working lifetimes easily breach combined thresholds. 

“This Budget will accelerate the trend as Rachel Reeves unveils additional wealth taxes targeting property and savings. Word on the street is that people are already enquiring about gifting strategies, trust structures, and business property relief arrangements that seemed unnecessary just months ago.”