The 2026/27 tax year brings continued pressure on UK estates, with the nil-rate band remaining frozen at £325,000 and the residence nil-rate band at £175,000 until at least 2030.
The most significant change is the inclusion of unused pension pots in the estate for IHT purposes from April 2027. This was announced in the October 2024 Autumn Budget and means that for deaths from April 2027, pension funds will be added to the estate valuation.
For many families, this is a major shift. The average UK pension pot at retirement in 2026 is approximately £170,000, which could push previously exempt estates over the IHT threshold.
The government's fiscal data shows that IHT receipts reached £7.8 billion in 2025/26, a record high driven by rising property prices and the frozen thresholds. An estimated 45,000 estates paid IHT in 2025/26, up from 27,000 in 2020/21.
Agricultural Property Relief (APR) and Business Property Relief (BPR) are also being reformed. From April 2026, a combined cap of £1 million applies to the total value eligible for 100% APR and BPR relief, with amounts above this threshold receiving only 50% relief.
What should you do? Review your estate plan now, especially if you have significant pension savings or agricultural/business assets. Consider making lifetime gifts, using trust structures, and maximising available exemptions.
At Castle Family Legal, we stay up to date with every tax change so you don't have to. Contact us for a free review of your estate plan in light of the 2026/27 changes.
