Burnham’s refusal to rule out 10% estate levy puts inheritance tax planning back in focus
Susannah Streeter, chief investment strategist at Wealth Club: “Any suggestion that inheritance tax could become more widespread is likely to focus minds. While nothing has been announced and it’s important not to jump to conclusions, the prospect of a broader levy on estates is another reminder that tax rules can change, and investors shouldn’t assume today’s regime will remain in place indefinitely.
The timing is particularly striking given that more estates are already falling into the scope of the tax. HMRC’s latest figures show inheritance tax receipts reached £2.3bn in the first three months of the financial year, £96m higher than the same period last year, with June delivering the highest monthly inheritance tax receipts on record. The inheritance tax net is widening, driven by years of frozen thresholds, rising property and asset values and plans to bring unused pension wealth into the inheritance tax regime from April 2027 will only reinforce that trend.
While there is no need for knee-jerk changes based on speculation alone, this is a timely opportunity for investors to review whether their estates are structured as tax efficiently as they would like. If the way wealth is taxed after death were to change further, it would fundamentally alter the inheritance planning equation for many families. Estate planning is becoming less about reacting to individual policy announcements and more about preparing for a tax landscape which is continually evolving.
Making full use of ISAs and pensions remains the foundation of good financial planning. But investors with larger estates may also want to consider specialist inheritance tax planning solutions as part of a diversified strategy. These can include qualifying Business Relief investments, which invest in UK trading businesses and, under current rules, can provide valuable inheritance tax relief after they’ve been held for the qualifying period.
Business Relief investments come in different forms to suit different investors. Some invest in carefully selected AIM-listed companies, while others back established private businesses or commercial forestry enterprises, offering exposure to growing businesses and real assets, with returns driven by long-term timber demand and biological growth rather than the day-to-day swings of stock markets. These are specialist investments carrying higher risks and lower liquidity, and should form part of a broader, diversified portfolio rather than being viewed simply as a tax-saving exercise.
However, investors should think beyond reacting to rumours and speculation and instead build portfolios that are resilient, diversified and as tax efficient as possible over the long term. The most effective inheritance planning is rarely about one solution, but about combining tax-efficient wrappers, gifting strategies and, where appropriate, specialist qualifying investments as part of a well-diversified financial plan.”