Autumn Budget 2025: Financial Planning
The autumn budget is due on 26 November 2025. Continuing increases in Inheritance Tax (IHT) liability for estates is challenging affected individuals to look at different ways of structuring their finances for the future.
The government continues to raise more funds by way of IHT. The Times and brokers and financial advisers are reporting an increase in life insurance policy enquiries. Latest HM Revenue & Customs figures show IHT receipts for April 2025 to August 2025 were £3.7 billion. This was £0.2 billion more than the same period in the previous year, an increase of 5.7%.
Insurance broker LifeSearch says that sales of whole life cover are up 230%. Edward Durell from Cover Direct explains: “There are a lot of positives to these policies because they will immediately pay out and cover that bill, meaning there is no need for beneficiaries to sell property, or get into difficulties paying the taxman.”
The need to rethink ‘traditional’ estate planning
Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, suggests that traditional estate planning, may need to change in the light of the frozen IHT nil-rate bands.
IHT is payable on the portion of an estate over £325,000, subject to some reliefs. This threshold last changed in 2009, and is not likely to change again until at least 2030. At the same time, the increase in the value of assets, in particular property, means that more estates are becoming liable for the tax.
Industry spokesmen
Will Hale, CEO of Key Advice & Air said:
“Tax planning must not be the preserve of the high net worth. It is imperative that all families seek advice and, given that £3.7 trillion of property wealth sits in the hands of the over 55s, this advice includes a consideration of all options for reducing the IHT liability – including modern later life lending solutions such as lifetime mortgages.”
Shaun Moore, tax and financial planning expert at Quilter commented that:
“HMRC’s latest tax receipts… highlight the fiscal bind facing the government. Between April and August 2025, PAYE income tax and National Insurance contributions reached £197 bn, up £17.3 bn year-on-year. With thresholds still frozen, more workers are being pulled into higher bands and businesses continue to bear rising employer NICs.
These measures have become the backbone of Treasury revenue. The political reality is that Labour has ruled out increasing income tax, NICs or VAT for working people. “That manifesto pledge leaves Rachel Reeves hemmed into a corner. With a £22bn fiscal hole to fill and the most obvious levers off the table, attention inevitably shifts to other taxes.
Inheritance tax is already on the rise, with receipts totalling £3.7 billion so far this year – £0.2 billion higher than the same period in 2024. Frozen thresholds, high property values, and the scheduled inclusion of pensions in 2027 mean IHT is set to grow further. Making it a tempting, if controversial, source of additional revenue.”
Including unused pension assets in IHT calculations
Unused pension assets, along with death benefits, will be included in IHT calculations from 6 April 2027. Government estimates are that out of around 213,000 estates with inheritable pension wealth in 2027-28, approximately 10,500 will be liable to pay IHT. They would not have been liable before. Around 38,500 will face an increased IHT bill.
At present, defined contribution pensions can be passed on free of IHT in most cases.
Will Hale explained the implications:
“What is evident is that these changes are another reason for property wealth to be considered as a core part of retirement and legacy planning. Later life lending products can help fund retirement and be used as an IHT mitigation tool. Therefore meaning that they are an important consideration for all advisers involved in wealth accumulation and decumulation.”
This means that pensions could have a lesser role in wealth transfer in the future. As a consequence people may choose to put money into other assets, such as property.
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