On Wednesday 26 November 2025, chancellor of the exchequer Rachel Reeves delivered the Autumn Budget alongside the latest forecast from the Office for Budget Responsibility (OBR). Her announcement introduced a number of tax and pension changes which have significant implications for many across Britain, particularly when it comes to estate planning and inheritance tax thresholds.
For individuals and families with pensions, savings or sizeable property, and for anyone thinking ahead to passing wealth on, the changes raise the risk that estates will be caught by Inheritance Tax (IHT), shrink net returns from savings, and alter the attractiveness of pension-based estate strategies.
Key changes from the Autumn Budget 2025 that will affect Estate Planning for many across the UK
From frozen personal tax thresholds to changes affecting pensions, savings, and income, many households may now face higher Inheritance Tax exposure than in previous years. Understanding these updates is essential for anyone looking to protect their assets, preserve wealth for future generations, and ensure that their estate plans remain effective under the evolving tax landscape.
Below we set out the key takeaways from an Estate Planning perspective and outline why now may be the time to revisit Wills, trusts and gifting strategies.
Inheritance Tax thresholds extended to 2031
The government’s decision to extend the freeze on the nil-rate band (£325,000) and residence nil-rate band (£175,000) means personal tax thresholds will now remain unchanged until April 2031. In practice, this long-term freeze operates as a stealth tax rise, because as property prices and asset values continue to grow, the real value of these allowances shrinks year by year.
With no adjustment for inflation, more estates will gradually exceed the Inheritance Tax limits even if a person’s wealth has not significantly increased in real terms. Families who would not previously have expected to face IHT liabilities may now find themselves within scope purely due to normal asset growth, particularly those whose main residence has appreciated in value.
This extended freeze also interacts with other elements of the Autumn Budget. As changes elsewhere reduce income tax relief and tighten the benefits of certain savings or pension routes, individuals could find it more challenging to offset future IHT exposure through traditional planning methods. The combined effect is that households may become liable for Inheritance Tax not because of significant new wealth, but because the thresholds no longer keep pace with the economy.
What this means:
For many, this shift underlines the importance of early estate planning, reviewing asset distribution, and reassessing whether existing arrangements will still be effective under frozen thresholds that now stretch into the next decade. If you’re currently thinking about later life planning, now is the time to review your arrangements to maximise available reliefs and exemptions.
At Jones Whyte, we have a dedicated team of Estate Planning solicitors and consultants who are experts when it comes to inheritance tax. We can provide a comprehensive review of your entire estate and guide you towards the most effective strategies to avoid large IHT bills in future.
Pensions to be included in taxable estates from 2027
The Budget also confirmed that from 6 April 2027, any unspent pension funds will be treated as part of an individual’s estate when calculating Inheritance Tax, which was announced in last year’s budget. This represents one of the most significant changes to estate planning in recent years, as pensions have traditionally been viewed as a protected asset and a place to build long-term savings without increasing future IHT exposure.
By bringing pensions into the IHT net, the government is effectively placing retirement savings on the same footing as more conventional assets such as investments or property income. For individuals who have relied on pension flexibility as a means of passing on wealth, the budget changes could result in a notably higher tax bill on death, especially where the majority of their wealth is tied up in pension funds rather than liquid cash.
The change also interacts with the broader tax landscape. As taxable earnings, investment returns and property income continue to form part of the overall estate picture, adding pension pots to that calculation may push more households above the IHT threshold than ever before. Clients with substantial pension savings, particularly those who have prioritised pensions for tax efficiency in later life, may find that their estates become significantly more exposed to Inheritance Tax once the new rules take effect.
What this means:
This development makes it even more important to review pension nomination forms, consider alternative strategies for accessing or distributing retirement savings, and ensure estate plans remain suitable in light of the expanded IHT treatment coming in 2027.
With pension contributions less attractive and savings returns lower, traditional saving and retirement strategies may need rethinking, e.g., consider lifetime gifting, trusts or life insurance to cover future IHT.
Income tax freeze also extended to 2031
The government has confirmed that income tax thresholds and National Insurance bands will remain unchanged for an additional three years, extending the freeze to 2031. This continued freezing of income tax thresholds creates what is widely referred to as fiscal drag: as wages rise, particularly with ongoing increases to the national living wage, more individuals are pushed into higher tax brackets even though the income tax rates themselves have not changed.
Because both income tax and National Insurance liabilities are calculated against fixed thresholds rather than inflation-adjusted ones, workers may see a growing portion of their salary absorbed by tax over time. Even modest annual pay rises, often designed simply to keep pace with inflation, can lead to unexpectedly higher tax bills under this prolonged freeze.
What this means:
For many households, this means that the overall tax burden may increase quietly from year to year. It also reinforces the need for careful financial and estate planning, as higher taxable income today can affect long-term wealth building, pension contributions, and future inheritance considerations.
In short, with income tax thresholds locked until 2031 and earnings likely to rise in line with the national living wage, strategic planning around income, savings and pensions becomes increasingly important to mitigate the cumulative impact of fiscal drag on personal finances.
Major changes to pension & national insurance contributions
The government has announced significant reforms to pension contributions that will take effect from 2029. A £2,000 annual cap will be imposed on salary sacrifice contributions that benefit from National Insurance relief. Any contributions above this cap will now attract both employer and employee National Insurance contributions, at 15% and 8% respectively.
Previously, high earners could use salary sacrifice schemes to reduce their taxable income and National Insurance liabilities while maximising pension growth. Under the new rules, contributions beyond the £2,000 limit will become considerably less attractive, reducing the incentive to channel large amounts of income into pensions.
In addition, savings income tax rates will rise by two percentage points from April 2027. The basic rate will increase to 22%, the higher rate to 42%, and the additional rate to 47%. This change reduces the after-tax return on cash savings and other interest-bearing investments, further highlighting the need to reassess retirement and estate planning strategies.
What this means:
Taken together, these reforms mean that anyone with significant pension contributions or taxable savings should review their pension strategy now. Understanding how the new national insurance thresholds interact with pension contributions is vital.
By planning ahead, individuals can make informed decisions about contribution levels, timing, and alternative routes for building retirement wealth before these changes take effect. This proactive approach helps to preserve tax efficiency and avoid unexpected liabilities in the years ahead.
Increased tax on savings interest: more taxable assets, lower returns
The 2025 Autumn Budget introduces a notable change to the UK tax system: from April 2027, the basic, higher, and additional rates of income tax on savings interest will each rise by two percentage points. This increase reduces the net returns savers receive from cash deposits, bonds, and other interest-bearing assets, affecting both day-to-day income and long-term wealth accumulation.
For individuals holding major investments in savings accounts or other interest-generating vehicles, the impact is twofold. Not only will after-tax returns diminish, but the gross value of these assets will now contribute more significantly to the taxable estate, particularly when combined with the frozen Inheritance Tax thresholds and the inclusion of pension pots in IHT calculations. This combination effectively creates a “triple squeeze” on many estates: rising nominal asset values, lower post-tax returns, and a broader tax scope under the evolving tax system.
What this means for you:
These changes make it a critical time to review estate plans. Clients should revisit Wills, Powers of Attorney, and Trust structures to ensure they remain effective under the new rules. Thoughtful planning now, before the April 2027 changes take effect, can help mitigate the increased tax burden and preserve more wealth for beneficiaries.
Advisors may also consider alternative strategies for holding major investments in a tax-efficient manner to minimise exposure to the forthcoming higher rates.
What should you consider doing now?
You may be wondering what the best course of action is in light of the 2025 Autumn Budget changes. At Jones Whyte, we advise taking a proactive approach to ensure your estate planning remains effective, tax-efficient, and aligned with your long-term goals. Key considerations include:
1. Review Wills, trusts and existing estate plans
Now is an important time to revisit your Wills, trusts, and broader estate plans, especially for clients with significant pensions, savings, or property assets. Structures that worked in the past may need adjusting to reflect the upcoming pension inclusion for IHT and the extended freeze on Inheritance Tax thresholds.
Even modest changes to assets over time can affect IHT exposure, so a thorough review ensures your plans remain fit for purpose.
2. Consider early gifting or lifetime transfers
Where appropriate and with professional guidance, making gifts during your lifetime can help reduce future IHT liability. Strategic gifting can be an effective way to transfer wealth to loved ones while managing potential tax implications, but timing and structure are key to maximising the benefits.
3. Re-evaluate pension-based planning strategies
Pensions have historically offered a largely IHT-free route for passing on wealth. With the 2027 changes bringing unused pension pots into the IHT net, it’s essential to reassess how pensions fit into your overall estate plan. This may include reviewing beneficiary nominations, contribution levels, and alternative ways to shelter wealth efficiently.
4. Explore other tax-efficient structures
Beyond pensions and direct gifting, there are a range of tools to manage IHT exposure and protect family wealth. Trusts, life insurance policies, and other tailored estate-planning vehicles can provide flexibility and security, particularly where estates include property or mixed assets.
5. Plan ahead for the 2027 changeover
While the pension inclusion for IHT is a few years away, acting now allows you to take advantage of existing rules, avoid last-minute pressures, and make considered decisions. Early planning ensures your estate strategies remain optimised and helps prevent unexpected tax liabilities in the future.
By taking a proactive, structured approach now, you can protect your estate, support your beneficiaries, and adapt to the evolving tax landscape with confidence.
Summary
The 2025 Autumn Budget represents a pivotal shift in the UK’s estate planning landscape. By freezing IHT thresholds, bringing pensions into the scope of IHT, capping pension-saving tax advantages, and raising tax on savings returns it effectively increases the likelihood that many estates will face a heavier IHT burden.
For clients who have long relied on pensions, savings or property wealth as part of their estate plan, these changes may fundamentally alter the calculus.
Now is a crucial moment to revisit estate plans, update Wills, trusts and gifting arrangements, and seek professional advice to revise strategies for passing on wealth in a more tax-efficient way.
Contact our team at Jones Whyte today to understand how the budget changes impact your estate.
Please note: This article is for general information purposes only and does not constitute legal advice. It should not be relied upon as a substitute for professional legal advice tailored to your specific circumstances. If you need advice on a legal matter, get in touch with our team.
