IHT Changes 2026–2027: What They Mean for Your Will

The two changes you need to know about

1. Pension pots inside the estate from April 2027

From 6 April 2027, unused defined-contribution pension funds will be included in your taxable estate for inheritance tax purposes. Until now, pension pots passed outside the estate entirely — they were one of the most effective IHT shelters available to UK residents.

After April 2027, the pension provider will be required to account for IHT on the pot before distributing the balance to your nominated beneficiaries. At 40% IHT on a pension of £200,000, that is £80,000 less for your family.

2. BPR and APR capped at £1 million from April 2026

From 6 April 2026, Business Property Relief (BPR) and Agricultural Property Relief (APR) are capped at £1 million combined per person. Above that threshold, assets receive only 50% relief rather than 100% — an effective IHT rate of 20% on the excess. For estates with significant business or farm assets, this changes the calculus considerably.

AIM-listed shares, which previously benefited from 100% BPR, are caught by the same cap. Existing planning structures built around unlimited BPR may need reviewing.

3. The nil-rate band freeze continues to 2030

The nil-rate band has been frozen at £325,000 since April 2009 and will remain frozen until at least April 2030. As house prices continue to rise, more estates cross the IHT threshold each year — not because of larger estates, but because the freeze has not kept pace with inflation.

A married couple can combine their nil-rate bands (£650,000). If the estate includes a home left to direct descendants, the residence nil-rate band adds up to £175,000 per person — sheltering up to £1 million combined. But both reliefs depend on your will being correctly drafted.

What your will needs to cover

The 2026–2027 changes make will review more important than at any point in recent years. A will drafted before 2026 may not reflect the new environment. The following provisions are worth checking:

• Residence nil-rate band (RNRB) — your home must pass to direct descendants to trigger this relief. A will leaving the property to siblings, friends, or a charity does not qualify.
• Charitable legacy at 10% — leaving at least 10% of the net estate to charity reduces the IHT rate from 40% to 36%, saving thousands on larger estates.
• Executor appointment — executors deal with HMRC on IHT liability. Name someone capable of managing paperwork and able to communicate with your pension provider about any pension IHT from April 2027.
• Life interest trust for a surviving spouse — preserves the deceased spouse's RNRB on the second death in certain circumstances. Specialist advice needed here.

Should you speak to a solicitor?

For most people with straightforward estates — a home, savings, and clear beneficiaries — a well-drafted DIY will is entirely valid under the Wills Act 1837. The WillSafe UK will kit is designed for exactly this situation.

You should speak to a specialist solicitor or tax adviser if you have: business assets above £1 million, agricultural land, foreign property, a blended family with competing claims, or a large pension pot approaching the new taxable threshold.