Understanding potential IHT reforms under discussion and preparing your estate for any cha

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With the Autumn Budget 2025 due on 27 November, speculation is once again swirling around Inheritance Tax (IHT). Frozen thresholds, record receipts and the inclusion of pensions in estates from 2027 have already pulled more families into scope — and many high-net-worth individuals are asking what might come next. At Bluebond, we believe the smartest move before any Budget is not to guess what the Chancellor will do, but to understand your current IHT exposure so you can react with clarity once the facts are known.

How Past Reforms Have Shaped IHT Planning

Over the past two decades, successive reforms have shown how quickly the rules, and the implications, can shift:Over the past two decades, successive reforms have shown how quickly the rules, and the implications, can shift:

2006 | Trusts Reform

In 2006, fundamental changes to trust taxation tightened flexibility for estate planners. The introduction of entry charges and periodic charges on most trusts made them less attractive for some families, though they remain powerful tools when used correctly.In 2006, fundamental changes to trust taxation tightened flexibility for estate planners. The introduction of entry charges and periodic charges on most trusts made them less attractive for some families, though they remain powerful tools when used correctly.

2015–2017 | Residence Nil-Rate Band

Between 2015 and 2017, the government introduced the Residence Nil-Rate Band (RNRB), adding up to £175,000 in additional tax-free allowance when passing a main residence to direct descendants. While appearing generous, this came with complex conditions and taper thresholds that created planning challenges for many estates.Between 2015 and 2017, the government introduced the Residence Nil-Rate Band (RNRB), adding up to £175,000 in additional tax-free allowance when passing a main residence to direct descendants. While appearing generous, this came with complex conditions and taper thresholds that created planning challenges for many estates.

2024 | Pensions in Scope from 2027

Most recently, the 2024 Budget announced that pensions would be brought into estates for IHT purposes from April 2027. This represents one of the most significant shifts in estate planning in decades, potentially adding hundreds of thousands of pounds to IHT bills for many families. Each change arrived with limited warning and those who already understood their estate composition and existing allowances were able to act swiftly to preserve their legacy.Most recently, the 2024 Budget announced that pensions would be brought into estates for IHT purposes from April 2027. This represents one of the most significant shifts in estate planning in decades, potentially adding hundreds of thousands of pounds to IHT bills for many families. Each change arrived with limited warning and those who already understood their estate composition and existing allowances were able to act swiftly to preserve their legacy.

Why Inheritance Tax Is Back in the Spotlight

Several factors have brought inheritance tax back to the center of political and public discussion. Understanding these drivers helps contextualize what reforms might be considered, though we emphasize that these are discussions under review, not predictions.Several factors have brought inheritance tax back to the center of political and public discussion. Understanding these drivers helps contextualize what reforms might be considered, though we emphasize that these are discussions under review, not predictions.

Revenue demand

There's significant fiscal pressure to raise revenue. The government faces substantial borrowing requirements and limited options for increasing taxation without political backlash. Inheritance tax, affecting a relatively small percentage of estates, represents an appealing target for revenue enhancement.There's significant fiscal pressure to raise revenue. The government faces substantial borrowing requirements and limited options for increasing taxation without political backlash. Inheritance tax, affecting a relatively small percentage of estates, represents an appealing target for revenue enhancement.

Fairness debate

There's growing political appetite for perceived "fairness" in wealth taxation. With widening wealth inequality and intergenerational wealth transfers increasing, some policymakers view IHT reform as a tool for addressing these concerns. Think tanks across the political spectrum have proposed various modifications to how wealth transfers are taxed.There's growing political appetite for perceived "fairness" in wealth taxation. With widening wealth inequality and intergenerational wealth transfers increasing, some policymakers view IHT reform as a tool for addressing these concerns. Think tanks across the political spectrum have proposed various modifications to how wealth transfers are taxed.

Inflation erosion

Frozen thresholds combined with rising estate values are naturally widening IHT's reach. The nil-rate band has been frozen at £325,000 since 2009 (over 16 years). With property prices and investment values rising, thousands more families are being drawn into the IHT net each year through fiscal drag rather than explicit policy change.Frozen thresholds combined with rising estate values are naturally widening IHT's reach. The nil-rate band has been frozen at £325,000 since 2009 (over 16 years). With property prices and investment values rising, thousands more families are being drawn into the IHT net each year through fiscal drag rather than explicit policy change.

Demographic shift

We're experiencing what economists call "the great inheritance wave"—the largest intergenerational transfer of wealth in history. As the baby boomer generation passes wealth to their children, the amounts involved have attracted Treasury attention.We're experiencing what economists call "the great inheritance wave"—the largest intergenerational transfer of wealth in history. As the baby boomer generation passes wealth to their children, the amounts involved have attracted Treasury attention.

These factors create an environment where IHT reform is being actively discussed at policy level. The Treasury and various think tanks have floated several potential changes, which we'll examine in detail.These factors create an environment where IHT reform is being actively discussed at policy level. The Treasury and various think tanks have floated several potential changes, which we'll examine in detail.

Topics Under Discussion

While no proposals are confirmed, several ideas have featured in Treasury reviews and policy think-tank papers. Below we outline what's being debated and why it's attracting attention:While no proposals are confirmed, several ideas have featured in Treasury reviews and policy think-tank papers. Below we outline what's being debated and why it's attracting attention :

Lifetime Gifting Cap

One reform under consideration involves introducing a cap on lifetime gifting. Currently, individuals can make unlimited gifts during their lifetime, which become exempt from IHT if the donor survives seven years (the Potentially Exempt Transfer rules).The concern from HMRC's perspective is that wealthy families can transfer unlimited value tax-free simply by surviving seven years after the gift. Some policy advisors argue this creates an unfair advantage for those with substantial assets who can afford to gift while maintaining their lifestyle.Possible directions include introducing a lifetime gifting cap similar to the U.S. system, or implementing a reporting mechanism that tracks cumulative gifts over time. Another option discussed is maintaining unlimited gifting but extending the survival requirement period.Even small changes to gifting rules could significantly affect succession planning timelines and strategies—which is precisely why understanding your current exposure and having a flexible plan matters now, before any changes are announced.

The 7-Year PET Rule

The seven-year rule for Potentially Exempt Transfers is another area under review. Currently, gifts become fully exempt from IHT if the donor survives seven years, with tapering relief after three years.

From a policy perspective, there's interest in simplification and preventing what some view as long-term avoidance. International precedent exists for longer periods—several European and OECD countries use 8-10 year rules for similar wealth transfer provisions.

Possible reforms include extending the period to 10 years, eliminating tapering relief, or changing how the clock resets with subsequent gifts. Some proposals suggest different time periods for different asset types or gift sizes.

The practical impact of such changes would be substantial. Many current estate plans rely on the seven-year rule, and extending it would require families to plan further in advance. This underscores the value of starting planning now rather than waiting to see what changes emerge.

Capital Gains Tax Alignment

HMRC has long considered the "rebasing" of capital gains on inherited assets as generous. Currently, when someone inherits an asset, its cost basis is reset to market value at death, eliminating any capital gains tax liability on growth during the deceased's ownership.

This rebasing is part of HMRC's broader simplification agenda, but it's also seen as creating a double benefit: estate assets potentially qualify for various reliefs, then inherited assets receive a CGT reset.

Under discussion is whether inherited assets should retain their original cost basis, meaning beneficiaries would pay capital gains tax on the full appreciation since the original purchase. Alternatively, some form of restricted rebasing might be introduced.

Such changes could fundamentally alter how families think about holding versus selling assets, and which assets to gift during life versus retain until death. It reinforces why understanding the current tax characteristics of your specific assets is crucial for responsive planning.

Frozen Thresholds

Perhaps the most significant ongoing change isn't a reform at all—it's the continued freezing of nil-rate bands. The £325,000 nil-rate band hasn't increased since 2009, and the £175,000 residence nil-rate band has been frozen since introduction.

This approach generates billions in additional revenue through fiscal drag. As property values and investment returns increase estates naturally, more families cross the threshold without any explicit tax rise being announced.

The political calculation is straightforward: maintaining frozen thresholds is much less visible than increasing tax rates, yet achieves similar revenue goals. It's politically easier than abolition would be politically challenging.

The decision ahead is between fiscal restraint (maintaining freezes to generate revenue) versus voter relief (increasing thresholds to adjust for inflation). Based on current fiscal pressures and historical precedent, significant increases appear unlikely in the near term, though some adjustment to account for extreme property price growth in certain regions might be considered.

Did You Know?

HMRC collected record IHT receipts of £7.5 billion in 2023/24, with projections reaching £9.7 billion by 2028/29. Frozen thresholds since 2009 mean more families are being drawn into the IHT net every year—but strategic planning can still legitimately reduce your liability to zero.

Source: OBR, Economic and fiscal outlook

How can you prepare? Understanding Your Own IHT Position

You don't need to predict the Chancellor's moves. You need to know where you stand now.

• List your key assets: property, pensions, investments, business holdings.
• Review existing gifts and trusts to see which exemptions apply.
• Calculate your potential IHT exposure using the free Bluebond IHT calculator.

Knowing your baseline serves two crucial purposes:

1. It helps you interpret new rules instantly when announced because you'll immediately understand whether and how changes affect your family.It helps you interpret new rules instantly when announced because you'll immediately understand whether and how changes affect your family.
2. It enables you to act decisively rather than reactively, implementing strategies based on facts rather than forecasts.It enables you to act decisively rather than reactively, implementing strategies based on facts rather than forecasts.

Expert Insight

Each Budget brings speculation, but the principles of smart planning never change: know your numbers, understand your exposure, and act when facts — not forecasts — become clear. The families who protect their wealth most effectively are those who plan from a position of knowledge, not hope.

Join Our Free Live Webinar – 29 November 2025

Autumn Budget 2025 & Inheritance Tax: What the New Rules Mean for You

Two days after the Chancellor's statement, Charles de Lastic, CEO of Bluebond, will host an exclusive webinar unpacking:Two days after the Chancellor's statement, Charles de Lastic, CEO of Bluebond, will host an exclusive webinar unpacking:

• The confirmed changes to inheritance tax and related measures.
• How they affect existing wills, trusts and pension structures.
• Immediate steps UK HNWIs can take to protect their wealth and legacy.

Date: Saturday 29 November 2025 Date: Saturday 29 November 2025

Time: 8 a.m. GMT Time: 8 a.m. GMT
Reserve your place

Final Thought

Inheritance Tax reform is rarely straightforward, but it's always significant.

By taking time now to understand your estate and how past reforms have shaped today's rules, you'll be positioned to respond confidently once the Autumn Budget 2025 is announced.

Bluebond will continue to guide you through every change — helping you make informed, timely decisions to safeguard your wealth and family's future.