Financial advisers across the UK are reporting a surge in clients taking pre-emptive action against a major shake-up to Inheritance Tax rules set for 2027.
The Upcoming Inheritance Tax Change
From 6 April 2027, the value of an individual's pension wealth will be included in the calculation of their estate for Inheritance Tax (IHT) purposes. IHT is a tax on the estate – the property, money, and possessions – of someone who has died.
Government estimates project that of the roughly 213,000 estates expected to have inheritable pension wealth in the 2027 to 2028 tax year, approximately 10,500 estates will be directly affected by this change. Furthermore, around 38,500 estates are predicted to pay more Inheritance Tax than they would have under the current rules.
The inclusion of pension assets is expected to increase the average Inheritance Tax liability by about £34,000.
Advisers See Proactive Planning
Industry professionals state that forward-thinking individuals are not waiting for the deadline, opting to review their financial plans now. Scott Gallacher, Director at Leicester-based financial planning firm Rowley Turton, told Newspage that his practice has been "very proactive" on the issue.
"Over the past year we’ve increased client communications through newsletters, webinars and practical tools on our website, including an IHT scorecard and calculator," Gallacher explained. "That early engagement has meant most conversations are thoughtful rather than reactive."
He noted that clients are carefully considering how their pensions fit into their wider estate strategy, rather than making rushed decisions.
Measured Strategies Being Implemented
According to advisers, the action being taken is considered and strategic. Key measures include:
- Reviewing pension nominations to ensure beneficiaries are correctly listed.
- Reassessing the role of pensions as a vehicle for passing on wealth.
- Using pension income more deliberately to facilitate lifetime gifting to family members.
- Where suitable, implementing specialist solutions such as Gift and Loan arrangements or Discounted Gift Trusts as part of a broader family financial strategy.
This measured approach allows individuals to understand the full implications of the change and make informed decisions that align with their long-term goals for their legacy.
