Potential inheritance tax changes 2025 mean that the complex matters in estate planning have become unusually certain. The government has signalled that major inheritance tax UK reforms could come in 2025, and while the details are still under review, the potential impact on families could be significant.
If you’ve worked hard to build up wealth—whether that’s in property, investments, or savings—you want to know it can be passed on to the next generation in the most tax-efficient way possible. But IHT changes 2025 may remove many of the current tax-free allowances, exemptions, and reliefs that households rely on today.
The risk is clear: waiting until the rules change could cost your family tens of thousands of pounds. Gifting strategies UK that work today may be worthless tomorrow. Allowances that currently protect your home from tax could vanish. And frozen thresholds, combined with rising house prices, already mean that more ordinary families are being dragged into inheritance tax UK every year.
This is not a tax just for the very wealthy—it’s increasingly affecting middle-class families who may not think of themselves as having “taxable estates” at all. That’s why the coming reforms matter, and why planning ahead could make all the difference.
What Are the Current Inheritance Tax Rules in the UK?
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Inheritance Tax (IHT) applies to the total value of your estate—your property, savings, and possessions—when you pass away.
- Nil Rate Band (NRB): £325,000 tax-free per person.
- Residence Nil Rate Band (RNRB): An extra £175,000 when your home passes to children or grandchildren.
- Combined, these mean individuals can pass on up to around £500,000 tax-free; married couples or civil partners combined could pass on about £1 million free of IHT. Anything above is taxed at the standard inheritance tax rate of 40%.
However, with house-price inflation and frozen thresholds, more estates are being dragged into UK IHT every year. That’s why the proposed reforms for 2025 are so important.
Inheritance Tax Changes 2025: What Might Be Different
Potential Inheritance Tax Changes 2025 under discussion:
- Removal of Taper Relief – without taper relief, gifts made within seven years could face the full 40% inheritance tax rate.
- Lifetime Gifting Allowance – a single cap could replace annual exemptions, with further gifts taxed once the allowance is used.
- Possible Removal of the Residence Nil Rate Band (RNRB) – homes could once again be caught in the IHT net.
- Frozen Thresholds & Rising Values – more estates are paying tax each year even without reform.
A Flatter, Simpler System? – while simpler, it could bring more estates into scope.
How These Changes Could Hit Households
Example 1: Impact of Losing Taper Relief
Margaret has an estate worth £900,000. She gifts £300,000 to her daughter and then lives for six years.
- Current rules: taper relief reduces the IHT bill to £23,760.
- Without taper relief: that same gift could cost £118,800.
This shows just how costly removing taper relief could be for families who rely on gifting strategies UK to reduce their liability.
Example 2: Home Back in the IHT Net
John is a widower with an estate of £480,000. With his late wife’s unused allowances, his threshold is currently £1 million.
- Current rules: no IHT due.
If RNRB is abolished: threshold could fall to £650,000, putting more family homes at risk.
Protecting Your Estate Before the end of 2025
- Review your estate now against the UK IHT threshold.
- Make use of today’s gifting strategies UK while they still apply.
- Explore options such as trusts, pensions, and life insurance in trust.
- Keep wills and Lasting Powers of Attorney up to date.
- Take early estate tax planning advice to avoid unnecessary tax.
At Liddle Perrett, we work with trusted partners who specialise in estate planning UK, including wills, trusts, and inheritance tax strategies, while we ensure your wider financial protections and plans align with your goals.
Final Thoughts: Why Acting Now Matters
Inheritance Tax Changes 2025 are not just a possibility—they are a likelihood. When the government looks for revenue, inheritance tax is often in the spotlight, and 2025 could bring the biggest shake-up in years.
The biggest risk is doing nothing. If you delay action until the new rules are in force, you may have already lost the chance to use today’s tax-free allowances and reliefs.
That could mean:
- Your family pays the full inheritance tax rate of 40% on gifts that would have been tax-free.
- Your home, once protected by the residence nil rate band, is suddenly dragged back into the IHT net.
- Your estate ends up with a bill of tens—or even hundreds—of thousands of pounds that could have been avoided.
- Today’s rules are still available, but they won’t be forever. Acting now could save your family significant sums and give you peace of mind knowing you’ve done everything possible to secure their future.
Speak to Liddle Perrett Ltd today to arrange a review—make sure inheritance tax changes 2025 don’t undo years of careful planning.
Disclaimer
The information contained within was correct at the time of publication but is subject to change. Estate planning is referred to a third party.
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This information is provided as a general guide and should not be taken as financial or legal advice. Your individual circumstances may vary, and we recommend consulting with a qualified financial advisor or solicitor to discuss your specific needs.
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