Why the Autumn Budget has made it vital to review your Will

Recent changes in pension legislation announced in the Autumn Statement could significantly affect how individuals approach succession planning. The new rules, effective from 6 April 2027, mean that certain pensions will now form part of an individual’s estate for Inheritance Tax (IHT) purposes.

This change highlights the importance of reviewing your Will and succession plans to ensure they align with your current circumstances and the latest legislation, or in this . At Butcher & Barlow, we always recommend revisiting your Will every two to three years to prevent it from becoming outdated. Life changes, such as the arrival of grandchildren, the death of a loved one, or shifts in legislation, could leave your assets vulnerable or even subject to intestacy laws.

Mike Bracegirdle explains what you need to know about these changes and why acting now is critical.

Key changes to pension legislation

1. Pensions Now Form Part of Your Taxable Estate

Under the new rules certain pensions will no longer automatically escape IHT. While the spouse exemption remains intact—meaning no IHT is charged when pensions are passed to a surviving spouse—the pension fund will be assessed for IHT upon the surviving spouse’s death.

2. Increased Complexity in Estate Administration

Personal representatives and pension scheme administrators will now need to calculate how the estate’s nil-rate band is apportioned across estate assets, including pensions. Before paying out benefits to beneficiaries, pension schemes must settle the IHT charge directly with HMRC.

Note: For pensions holding property, specific guidance on paying IHT is pending. It is assumed properties within pensions will need to be sold to meet tax obligations, or tax paid by instalments.

3. Income Tax on Pensions for Those Aged 75 and Over

For individuals aged 75 or older at the time of death, beneficiaries will also need to pay income tax on any residual pension funds they receive.

The Government has opened a consultation process on the proposed implementation of the changes with the responses deadline being the 22^nd January 2025. Given the short consultation period, it is thought that the Government is not intending to deviate from the basic principle of taxing a deceased person’s pension fund. The next stage after the consultation will be draft legislation and a final consultation before the legislation is passed into law.

Implications for succession planning

What is already clear is that this legislation marks a fundamental shift in estate planning. For years, financial advisers have encouraged individuals to use savings and investments during retirement while preserving pensions as a tax-efficient means of passing down assets to the younger generations. This approach will need to be reconsidered.

Subject to the outcome of the consultation and the consequent draft legislation, key considerations may be:

Spending Pension Funds Earlier
With pensions now subject to IHT, using them as a primary source of retirement funding may become more appealing. However, this could impact the value of your estate for beneficiaries.

Lifetime Gifting
Gifting assets during your lifetime could help mitigate IHT liabilities, but it comes with its own complexities:

Gifting property but continuing to live in it could violate “reservation of benefit” rules, invalidating the gift.
Gifting assets may affect eligibility for Local Authority care funding, especially if the gift falls foul of the Deprivation of Assets rule.

Impact on Savings & Investments
With pension funds less favourable for inheritance, retaining savings and investments may become a more attractive strategy.

Steps to Take Now

1. Review and Update Your Will

A clear, well-structured Will ensures that your wishes are carried out and your assets are distributed efficiently. If you haven’t reviewed your Will in recent years, now is the time to do so.

2. Seek Expert Advice

Work with a trusted team of financial advisers, pension advisers, and Solicitors to reassess your succession plans. Understanding how these changes impact your estate is crucial for protecting your legacy.

3. Plan for the Future

Acting now ensures you are prepared, rather than caught off guard when the rules come into effect. Takes advice now and following the implementation of these changes.

How can Butcher & Barlow assist?

Succession planning has always been a complex and highly personal process. These changes only add to the challenges. Whether you’re a landowner, a business owner, or simply someone looking to secure your family’s future, understanding how to protect your estate is vital.

The new rules may alter the traditional strategies of preserving wealth for the next generation. Working with professionals ensures that your plans account for the latest regulations and minimise the tax burden on your beneficiaries.

At Butcher & Barlow, we understand the challenges of succession planning and are here to guide you through them. Our Team will work closely with you to:

Create or update your Will.
Advise on lifetime gifting strategies.
Plan for care costs and other financial obligations.
Ensure your estate is protected and passed on efficiently.

The information in this article was correct at the time of publication. The information is for general guidance only. Laws and regulations may change, and the applicability of legal principles can vary based on individual circumstances. Therefore, this content should not be construed as legal advice. We recommend that you consult with a qualified legal professional to obtain advice tailored to your specific situation. For personalised guidance, please contact us directly.