With the Autumn Budget set for 26th November 2025, speculation is mounting about potential changes to Inheritance Tax (IHT). Chancellor Rachel Reeves faces the challenge of balancing the nation’s books, and with manifesto pledges limiting her options on income tax, VAT, and National Insurance, IHT has become a prime target for reform.
IHT receipts have already hit record levels, with £8.2 billion collected in 2024-25, up £750 million on the previous year. Whilst currently only around 4-5% of estates pay IHT, this number is rising steadily. With nil-rate bands frozen until 2030 and property values continuing to climb, more families are being pulled into the IHT net each year.
Add to this the changes already announced in last year’s Budget, including pensions entering IHT scope from 2027 and reduced agricultural and business property relief from 2026, and it’s clear that estate planning is becoming increasingly complex.
So, what could be on the horizon? Let’s take a look at the rumours circulating in professional circles and what they might mean, particularly for business owners and their families.
Rumoured inheritance tax changes and what they mean for business owners
It’s important to stress that these remain rumours at this stage. Nothing will be confirmed until Budget Day, and making hasty decisions based on speculation can prove costly. That said, understanding what’s being discussed helps you prepare for potential changes ahead.
Will the 7-year gifting rule change to 10 years?
Currently, gifts made more than seven years before death fall outside your estate entirely and are fully exempt from IHT. This seven-year rule has been a cornerstone of estate planning for decades.
However, there’s speculation that this qualifying period could be extended to ten years. This change would fundamentally alter the timeline for estate planning, particularly affecting older business owners who may be looking to retire and pass control to the next generation.
The practical impact would be significant. Business succession typically involves a gradual handover, not a single event. If you’re 65 and planning to transfer your business, you’d need to factor in potentially living to 75 before the gift is fully outside your estate. For business owners in their 70s, the extended timeframe could make lifetime gifting impractical as a planning tool, potentially forcing them to retain ownership longer than ideal for business continuity.
Lifetime gifting cap: How much could you give away tax-free?
Whilst the seven-year rule deals with timing, a separate rumour concerns the total amount you can gift. Currently, there’s no overall limit on the value of gifts you can make during your lifetime (beyond the annual £3,000 exemption). You could gift £5 million, £10 million, or more, provided you survive seven years.
The speculation is that the government may introduce a lifetime cap on cumulative gifts, with figures ranging from £50,000 to £200,000 being discussed. This would represent a fundamental shift in how gifting works.
Under a £100,000 lifetime cap scenario, if you gifted £300,000 over your lifetime, your estate would face IHT at 40% on the £200,000 excess, resulting in an £80,000 tax bill. With a stricter £50,000 cap, the same £300,000 in gifts would trigger £100,000 in IHT.
For business owners, this creates a particularly challenging situation. If you’re transferring a family business worth £500,000 in shares to your children, even a £200,000 lifetime cap would mean £300,000 of that transfer could be subject to IHT. Combined with the existing £1 million cap on 100% business property relief announced last year, business owners could find themselves caught between two different limitations, severely restricting their succession planning options.
Taper relief changes: What happens if you don’t survive 7 years?
Under the current system, taper relief provides a sliding scale of tax reduction for gifts made between three and seven years before death. The IHT rate falls progressively from 32% down to 8% as you approach the seven-year mark. Taper relief only applies if the total value of gifts made in the seven years before you die is over the £325,000 threshold.
There’s speculation that taper relief could be adjusted or even removed entirely. If scrapped, this would create a ‘cliff edge’ in the system. Beneficiaries could face a substantial tax bill if the person who made the gift died just one day short of seven years, with no graduated relief to soften the blow.
For business owners, the removal of taper relief would add another layer of risk to succession planning. Currently, even if you don’t survive the full seven years, taper relief provides some mitigation if the value of gifts exceeds the £325,000 threshold. Without it, the stakes become significantly higher, and the all-or-nothing nature of the seven-year rule (or potential ten-year rule) becomes even more pronounced.
Capital gains tax base cost uplift on death: Will it be removed?
Currently, when someone inherits an asset, the capital gains tax (CGT) base cost is ‘rebased’ to the market value at the date of death. This means CGT isn’t paid on the increase in value that occurred before the inheritance, only on gains after that point.
There’s speculation that this rebasing could be removed, meaning heirs would pay CGT on the entire profit when they eventually sell, not just the increase since they inherited. Combined with IHT at 40%, this could create a double taxation burden on the same asset, with CGT potentially reaching 24% under the current rates.
For family businesses, this could be particularly painful. Imagine inheriting a business that’s grown significantly in value over decades. You’d face IHT at 40% on the value at death, and then potentially CGT of up to 24% on the entire gain when you eventually sell. This double hit could make it financially difficult to retain family businesses through generations.
Pensions and inheritance tax from 2027 (already confirmed)
This isn’t a rumour, it’s already happening. From April 2027, unspent pension pots and some death benefits will fall within the scope of IHT. Previously, pensions sat outside estates and could be passed on free of IHT, making them a powerful wealth transfer tool.
The government’s position is clear: pensions “should not be a vehicle for the accumulation of capital sums for the purposes of inheritance.” For those with substantial pension savings, this represents a significant change in how they might approach retirement drawdown and estate planning.
Business owners who’ve built up sizeable pensions may need to reconsider their drawdown strategies. What was once an IHT-efficient way to pass wealth to the next generation will soon attract the 40% charge, potentially making it more tax-efficient to draw down pensions during your lifetime rather than leaving them for your heirs.
Other potential inheritance tax and capital gains tax changes
Beyond the main rumours, other possible changes being discussed include:
CGT rate increases: CGT rates were already increased in the 2024 Budget, but further increases aren’t off the table. Higher rates would affect business owners looking to exit or sell assets.
Changes to Business Asset Disposal Relief (BADR): Already made less generous in last year’s Budget, there’s speculation this could be further limited or scrapped entirely, removing a valuable relief for business owners selling their companies.
Holdover relief restrictions: Changes to this valuable CGT deferral relief could impact the tax efficiency of transferring business assets into trusts or gifting them to the next generation.
Further freezing of nil-rate bands: Already frozen until 2030, an extension of this freeze would continue to drag more estates into IHT through fiscal drag.
Estate planning steps to take before the autumn budget
Whilst we don’t recommend making hasty decisions based on rumours, there are sensible steps you can take now to prepare:
Review your current position: Understand where you stand now. What’s the value of your estate? What reliefs are you currently benefiting from? How would potential changes impact your plans?
Use available allowances: Make use of current exemptions whilst they’re available. The £3,000 annual gifting allowance, small gift exemption (£250 per recipient), and regular gifts out of surplus income remain in place.
Consider timing of significant gifts: If you were planning to transfer property, shares, or significant assets, and the removal or restriction of current reliefs would substantially impact you, it may be worth considering the timing of such transfers. However, this should only be done as part of a comprehensive plan, not as a knee-jerk reaction.
Review your will and trusts: Ensure these documents are up to date and structured to provide flexibility for whatever changes may come. A well-drafted will with appropriate trust provisions can provide options to adapt to changing tax rules.
Think about business succession: If you own a business, don’t wait for tax changes to force your hand. Good succession planning takes time and should be driven by what’s best for the business and family, not just tax considerations. That said, understanding the potential tax implications helps you make informed decisions.
Check your pension strategy: With pensions entering IHT scope from 2027, review your retirement drawdown plans. The optimal strategy may have changed.
Understanding retrospective tax changes and timing
Don’t panic: This is perhaps the most important point. UK governments typically don’t apply new IHT rules retrospectively. Gifts made before Budget Day are usually protected under existing rules. This means that if changes are announced on 26th November, gifts made before that date should generally benefit from the current, more favourable treatment.
However, this isn’t an excuse to rush into poorly planned decisions. Any gifts or transfers should be:
- Part of a comprehensive estate plan
- Affordable (never gift money you might need)
- Considered in light of your overall family and business circumstances
- Made with proper legal and tax advice
Join our autumn budget 2025 webinar: Expert guidance on tax changes
The Autumn Budget could be one of the most significant moments for IHT reform in years. To help you understand the confirmed changes and what they mean for you and your business, we’re hosting a comprehensive webinar: The Autumn Budget 2025: Everything You Need to Know.
Our experts will break down the actual changes announced in the Budget, explain what they mean in practical terms, and discuss strategies to help you navigate the new landscape.
Don’t leave your estate planning to chance. Join us to get clarity on the changes and understand your options going forward.
Final thoughts on inheritance tax planning
It’s worth remembering that all of this remains speculation until the Chancellor stands up on 26th November. The rumours may prove unfounded, or the changes may look quite different from what’s being discussed now. Making snap decisions based on speculation can be as dangerous as doing nothing at all.
What we do know is that the IHT landscape is changing. Between frozen thresholds, rising property values, and the reforms already announced for pensions and business reliefs, estate planning is becoming increasingly important for a growing number of families.
The key is to stay informed, understand your current position, and be ready to act once we have clarity on what the Budget actually contains. Whatever happens on 26th November, good planning, done properly with professional advice, will always be your best defence.
Our webinar will help you cut through the noise and focus on what really matters for you and your family. We look forward to seeing you there.
