Narrow Window for Estate Planning Means UK HNWIs Should Act Soon

From a UK estate planning perspective, 2025 will be remembered as a year in which many mooted announcements, such as major reforms to capital gains tax, failed to materialize and, in the closing weeks of the year, for a partial climbdown on one of the government’s flagship tax-raising policies.

However, the absence of punitive announcements in the November 2025 Budget and the subsequent watering down of the attack on business and agricultural property shouldn’t give rise to complacency.

The government has shown itself to be an unashamedly tax-and-spend regime, and taxpayers looking to mitigate their exposure have been put on notice.

Narrow Planning Window

The unifying theme across the changes is timing. The rules are shifting, but slowly, and subject to unexpected changes.

If the government is to see out its five-year mandate, the likelihood is that the direction of travel toward a higher-tax economy will persist.

With this in mind, 2026 is a year to review property holdings, reassess reliefs, test liquidity, and revisit structures with a clear understanding of what lies ahead.

Reliefs Under Pressure

Although not the most headline-grabbing change introduced last year, the government’s flagship changes to business property relief and agricultural property relief may be top of mind for many high-net-worth individuals.

This is because the changes were announced with less than four months before the limitation of the relief to £2.5million ($3.4 million) per taxpayer takes effect—leaving affected individuals with little time to make a once-in-a-generation decision as to how to pass on the fruit of their life’s labors.

However, rushing headlong into that decision isn’t the answer. Despite only having until April 6, it’s important that the first few months of this year are used as an opportunity to take stock and have frank conversations with advisers on the best way to proceed ahead of the regime’s effective start date.

Property Values

One of the most headline-grabbing measures announced in the Budget was the introduction of new annual charges on high-value residential homes, informally dubbed the “mansion tax.”

Starting April 2028, a banded high value council tax surcharge will apply to properties valued at £2 million or more, starting at £2,500 per year and rising to £7,500 annually for homes valued above £5 million. This charge will sit alongside existing council tax and be collected by local authorities.

Many affected homeowners, particularly in London and the south of England, would balk at the notion that their property would constitute a mansion. Nonetheless, the value of their property in 2026 as determined by the government will inform whether they will be liable to pay a tax that hitherto they wouldn’t have budgeted for.

Given the arbitrary bandings and the associated increase in the tax due, the government can expect many challenges to their initial valuations. The government expects the tax will raise £400 million by 2029-30, representing a drop in the ocean in terms of public finances. It will come as no surprise if the government takes the view before 2028 that the burdensome bureaucracy of and insignificant income from this change mean that the mansion tax never sees the light of day.

Nevertheless, homeowners may want to anticipate the charge by transferring their home into the names of the beneficiaries of their will, potentially mitigating their estate’s liability to inheritance tax on their death and passing the burden of the mansion tax to the beneficiaries. Anyone considering doing this should do so with extreme caution to avoid the gift with reservation of benefit rules.

Pensions No Safe Harbor

Changes to the inheritance tax treatment of pensions are coming, but not yet. The inclusion of unspent pension pots within the estate won’t take effect until 2027. That matters as it means there is still time to plan.

Once the upcoming changes take effect, unspent pension wealth will be brought into the inheritance tax calculation. This means that pension wealth is no longer a “safe harbor” for inheritance planning.

For many years, leaving a large pension pot untouched at death allowed beneficiaries to inherit significant funds free of inheritance tax. Now high-net-worth individuals and their financial advisers must re-evaluate estate plans that relied heavily on pension pots as a tax-efficient transfer vehicle.

For many people, pensions will remain valuable—but no longer dominant—planning tools. The key point is that decisions can be made deliberately with the appropriate financial advice rather than under pressure.

Lifetime Gifting

It’s notable what wasn’t announced in 2025. Rumors persisted that changes were incoming on lifetime gifting, either to introduce a cap or extend the seven-year deadline to 10. However, the Budget came and went with no mention of changing this. Positively, this means that established gifting strategies remain available.

Individuals who had paused decisions in anticipation of more restrictive rules should recognize that 2026 remains a viable year to act under the existing framework, provided the planning is well structured. Individuals should ensure that they retain sufficient funds to meet their own needs, including the still open-ended question of the cost of care.

Looking Ahead

Taken together, these developments highlight that 2026 is a pivotal year for UK estate planning. While some headline reforms have been softened or delayed, the underlying trend toward higher taxes and tighter reliefs is clear.

High-net-worth individuals and their advisers should use this window to review their estates comprehensively, make deliberate decisions, and implement strategies that balance tax efficiency with personal and family needs, rather than waiting until changes are unavoidable.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Richard Burgess is a partner in Moore Barlow’s private wealth team.

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