Navigating the Autumn Budget. What you need to know about pensions, gifting and inheritance tax

Chancellor Rachel Reeves is under pressure to raise revenue and the Treasury reportedly exploring a range of options, so is now the time to review your retirement and estate planning strategies?

In the 2024 Autumn Budget, the government announced a major change to the IHT treatment of pensions. From April 2027, most unused pensions will be included in your taxable estate on death. This reverses the long-standing position that allowed pensions to be passed on IHT-free, particularly when the pension holder died before age 75.

Since 2015, many people have structured their financial plans around the principle of leaving pensions untouched to pass wealth tax-efficiently to the next generation. With the new rules, that cornerstone has shifted.

For people approaching retirement, prioritising pension withdrawals could be necessary to reduce the IHT liability on their estate. This income could be used for living expenses, gifted under the surplus income exemption, or used to fund whole-of-life insurance policies to cover the anticipated tax charge upon death.

We’re also seeing a marked increase in people taking their pension tax-free cash allowance  (particularly those over the age of 75). Under the new rules, if you die after April 2027 without having taken your tax-free cash, that entitlement is lost and the full value of the pension becomes taxable. It’s a stark shift from our previous stance, where we discouraged taking tax-free cash due to its IHT implications. Please remember that tax treatment depends on individual circumstances and may change again in the future so seeking advice is important.

This isn’t just about reacting to legislation — it’s about reviewing and potentially rebuilding   your financial plans to ensure they remain fit for purpose. With careful planning, we can help you adjust your financial arrangements to stay aligned with your goals over time.

Gifting remains a powerful estate planning tool, but it too may be under review. George Osborne, former Conservative Chancellor of the Exchequer, noted in our recent pre-Budget webinar that Treasury officials regularly proposed tightening gifting rules, including lifetime caps and changes to the seven-year rule. "I turned them down," he said, "because I actually wanted to cut inheritance tax, not increase it."

However, with the current government under pressure to raise revenue, these proposals may resurface. Osborne warned that “by process of elimination,” if income tax and VAT are off the table, wealth taxes (including those related to gifting and pensions) become more likely targets.

However, you should be always cautious about making financial decisions based on speculation. But if you’re already planning to retire or gift, accelerating those plans may be sensible. For example, taking regular income from pensions and gifting it under the surplus income exemption could be an effective way to reduce the taxable estate.

The Budget process is notoriously opaque and Osborne was clear that “even the Chancellor doesn’t know what’s in the budget today.” Yet speculation can drive behaviour.

This year, the government has ruled out certain measures, such as VAT on private healthcare, but has remained silent on others. As Osborne put it, “you end up with reasonable guesses on where the Chancellor is not ruling things out, so therefore, where she might be fixing the attention.”

The right advice and planning could mitigate the impact of change.
For now, you could consider: 

• Reviewing your pension drawdown strategy
• Ensuring that your pension nomination of beneficiary forms are up to date
• Using surplus income gifting
• Purchasing a life insurance policy to offset your IHT liability   

Before taking any action, you should consider taking professional advice.

For everything you need to know about the Autumn 2025 Budget, visit our Budget hub for the latest news and updates, and sign up for our webinar series to stay informed both before and after Budget day.