Ensure your succession planning is up to date

While inheritance tax is currently levied on just over four per cent of estates, around 27,800 annually, the proportion is expected to rise sharply as asset values grow. By 2033, more than seven per cent of estates are projected to fall within scope. What was once a tax associated only with the wealthiest households is becoming increasingly relevant to middle-income families, making careful planning more important than ever.

Currently, inheritance tax is charged at 40 per cent on the value of estates above the nil-rate band of £325,000, a threshold fixed until 2030. Tax is payable only on the portion exceeding this figure. For example, an estate worth £335,000 would see a liability of £10,000. Married couples and civil partners can combine allowances, effectively doubling the threshold, with further relief available through the residence nil-rate band.

One of the most widely used planning mechanisms is the ability to make gifts during a person’s lifetime. Under current rules, assets transferred at least seven years before death fall outside the estate for inheritance tax purposes. Where death occurs sooner, taper relief gradually reduces the liability depending on how much time has passed. These provisions have been particularly valuable for families supporting younger generations to buy homes or for those wishing to transfer shares or business interests.

The potential new system under discussion would look quite different. Proposals include extending the seven-year rule to ten years or even abolishing it altogether. A new lifetime gift allowance may also be introduced, restricting the amount that can be transferred without tax. Meanwhile, changes to taper relief could mean that gifts made later in life carry a heavier liability. Collectively, the effect of these reforms would be to narrow the window of opportunity for efficient succession planning.

For family businesses, the implications may be even more significant. Succession planning often involves the careful transfer of shares or assets, and a longer or more restrictive timeframe could complicate transitions between generations. Without early preparation, the risk is that tax exposure increases or succession strategies are disrupted.

Taking proactive steps now is therefore advisable. Reviewing wills, ensuring records of past gifts are clear and up to date, and commissioning valuations of businesses or properties can all provide greater certainty. While any measures announced in the Budget are unlikely to take immediate effect, families considering substantial gifts may still wish to plan ahead to take advantage of the current regime. Trusts also remain a valuable option for those seeking to plan further into the future.

Succession planning is never static, it shifts with both life events and legislation. Marriages, divorces, new children or revised tax rules can all alter the shape of an estate, meaning a will left untouched for years may no longer reflect personal wishes or legal realities. With the Budget approaching, now is a critical time to review arrangements, seek professional advice and ensure estate plans are up to date so current reliefs are maximised and future changes can be adapted to with confidence.

Claire McNaught is a private client legal director, Gilson Gray