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Inheritance Tax Planning Ahead of the 2025 Budget
Protecting Family Wealth Through Pre & Post Nups
Your Making Tax Digital Questions Answered
Contents
3 Welcome to our Autumn Newsletter
4 Inheritance Tax Planning Ahead of the 2025 Budget
6 Making Tax Digital: Your Questions Answered
8 How Pre- and Post-Nuptial Agreements Can Help Protect Family Wealth
10 Trusts and Inheritance Tax: What the 2026 BPR and APR Changes Mean for You?
12 Protecting Your Pension: The Impact of the 2027 IHT Rules
14 Understanding the DIY Housebuilder VAT Scheme
16 Meet the Team
As we reach the final quarter of the year, the tax landscape continues to evolve, bringing with it both challenges and opportunities for our clients. In particular for those impacted by the significant changes announced to Inheritance Tax Reliefs announced at the last Budget. M any people are taking steps to consider their position now, with reports of a 60% increase in the pension commencement lump sum (formerly called the tax-free lump sum) being taken over the past year. So, with that in mind, in this edition, we look ahead to the upcoming Budget on 26 November. We’ll also delve into the latest consultations on trusts, examining how proposed reforms might affect trustees and beneficiaries. A common topic of discussion amongst our clients over the last 12 months. Then, as many turn to lifetime gifting as a solution to mitigating IHT liability, we speak to Kerseys
Simon Hurren Private Client Tax Partner simon.hurren@scruttonbland.co.uk 01473 945822
Solicitors about the importance of protecting assets in a divorce with a pre or post-nuptial agreement. Making Tax Digital (MTD) remains a hot topic and with the changes on the horizon for April next year, we tackle some of the most frequently asked questions on the subject to help you prepare. Finally, we turn to VAT with a spotlight on the DIY Housebuilders Scheme, clarifying common pitfalls and opportunities for reclaiming VAT on self-build projects. We hope you’ll find this edition informative and thought-provoking. And, as always, please get in touch if you’d like to discuss any of the topics in more detail.
The Chancellor warned in August that tax rises will be needed to fill the £51 billion black hole. So, with pre-Budget planning more important than ever, we’ll share insights that help explore some of the areas you may wish to consider in the next few weeks - whilst we still have certainty of the current rules. Firstly, now that we have further details of the impact of the Inheritance Tax (IHT) changes coming into place from April 2026, we explore some proactive estate planning strategies to consider. With insurance an important part of the planning, we’ve got an article from Independent Financial Advisers -Amber River to highlight the role of insurance in IHT planning.
P.S. We’ll once again be hosting our free Budget Breakfast events in person and online on Thursday 27 November – we’d love to see you there. Book your place now via the QR code opposite, or by visiting our website: scruttonbland.co.uk/news- views/budget-breakfast-autumn-2025/
PRIVATE CLIENT | SCRUTTON BLAND | 3
Inheritance Tax Planning Ahead of the 2025 Budget
Many of you will be acutely aware of the significant reforms to inheritance tax (IHT) announced in the 2024 Autumn Budget - not least because the farming community have kept them very much in the news.
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I ndeed, a recent report predicted that the Government’s total IHT take could reach £9 billion by 2027 – up by around £2 billion since 2022/23 – and it will not only be farms and other family businesses that are hit, but whole swathes of “Middle England” with pension savings, valuable property or significant savings included. Moreover, a combination of the Chancellor’s continuing economic headaches and Labour’s manifesto commitment not to increase income tax, National Insurance contributions or VAT, are widely expected to lead to the announcement of further changes in the Budget on 26 November, albeit some or all of the changes may not be implemented until a later date.
What potential changes could we see in the 2025 Autumn Budget?
Reassessing your pension strategy : consider spending pension funds first, or other strategies to reduce the impact of the April 2027 changes. Reviewing the tax exposure of any family trusts : the new cap on reliefs will significantly affect both existing and new trusts. Assess investments : such as AIM shares, which may currently qualify for BPR, are also worth looking at.
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Lifetime gifting cap : the Government is reportedly considering a lifetime cap on the value of gifts that can be made free of IHT. Currently, gifts to individuals of any amount are potentially exempt if the donor survives for seven years. Changes to the 7-year rule : the time frame for potentially exempt transfers could be extended beyond seven years, with some commentators suggesting a period of 10 or even 14 years. Reform of gifting exemptions : there could be reviews of or restrictions on exemptions, such as the £3,000 annual gift allowance. Further changes to reliefs : the Government may continue to restrict or remove other IHT reliefs, especially if they are deemed unfair or costly to the taxpayer. Flat-rate IHT : some analysts suggest the Government may consider a simplified flat-rate IHT regime, potentially replacing the current ‘cliff edge’ 40% rate with one applied more broadly.
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There is no ‘one size fits all’ solution though, and whether or not any of the above will help you depends on your precise circumstances. We’re here to help Given the complexity of the confirmed and potential changes, we’d urge you to seek professional advice now, rather than let a potential tax saving slip you by. To find out more about how we can support your Inheritance Tax planning, speak to one of our specialist team by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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To recap on the key IHT changes already legislated: -
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Cap on business and agricultural relief : from April 2026, 100% Business Property Relief (BPR) and Agricultural Property Relief (APR) will be capped at a combined value of £1 million. Any qualifying assets above this amount will receive a reduced 50% relief, with the cap applying separately to individuals and (subject to complex rules) trusts. Pensions to become taxable : from April 2027, most unused pension funds will be included in an individual’s estate for IHT purposes. This represents a very significant shift, as private pensions have historically been exempt from IHT. Thresholds frozen until 2030 : the nil- rate band of £325,000 and the residence nil-rate band of £175,000 are frozen at their current levels until at least April 2030. Due to inflation and rising asset prices, this “fiscal drag” is expected to bring more estates into the IHT net. New residency-based tax system : since April 2025, the historic domicile-based IHT system has been replaced with a residence-based one. This could bring the worldwide assets of long-term UK residents within the scope of IHT.
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So, what actions could you consider ahead of the Budget? The confirmed and potential changes outlined above highlight the importance of proactive estate planning. Because for those with substantial pension pots, businesses, or agricultural holdings, reviewing your arrangements before the relevant reforms come into force is now critical.
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Key strategies to consider include:
Reviewing your Will : Ensure your Will is structured to maximise allowances, especially given the new cap on BPR and APR and its “use-it-or-lose-it” nature for spouses and civil partners. Accelerating lifetime gifts : given the potential for changes to the gifting rules, consider making gifts sooner rather than later to start the seven-year clock under the current, more lenient regime.
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Paul Harris Private Client Tax Partner paul.harrisscruttonbland.co.uk 01473 945824
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Making Tax Digital: Your Questions Answered
Making Tax Digital is one of the most
significant changes to UK tax administration in decades. But whilst it may seem daunting, early preparation and the right support can turn this challenge into a strategic advantage.
T o help you get prepared we’ve Q: What is Making Tax Digital (MTD)? A: Making Tax Digital is HMRC’s flagship initiative to modernise the UK tax system. It requires businesses and individuals to maintain digital records and submit tax returns using compatible software. The aim is to improve accuracy, reduce errors, and make tax administration more efficient. MTD began with VAT and is now expanding to Income Tax Self- Assessment (ITSA). pulled together some of our most frequently asked questions to help you clarify just what Making Tax Digital means for you. Q: Who will be affected by MTD for Income Tax and when? A: MTD for Income Tax will be rolled out in stages:
Qualifying income includes self-employment profits and property rental income , both UK and foreign. Importantly, this is gross income before expenses too, so even if your net profit is below the threshold, you may still be required to comply. Q: What are the key requirements under MTD for Income Tax? A: Those that qualify for MTD must:
Q: What’s the best software to use for MTD? A: You’ll need to use MTD-compatible software that can link directly to HMRC’s systems. Popular options include Dext , Xero , QuickBooks , and FreeAgent , among others. We can help you choose the right solution based on your business size, complexity, and budget. But there’s also a useful software finding tool on the gov.uk website to help you decide. Q: Are there any exemptions from the scheme? A: Yes. You may be exempt if:
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Keep digital records using HMRC-approved software.
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Submit quarterly updates to HMRC summarising income and expenses.
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You do not have a National Insurance number.
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Submit a final declaration at year-end to confirm accuracy and make any adjustments.
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It is not reasonably practicable for you to comply (e.g., due to age, disability, or remote location).
Quarterly updates are due one month after each quarter ends. For example, the first quarter (6 April–5 July) must be submitted by 7 August.
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You are a specific care provider (e.g., foster carers).
From April 2026: Sole traders and landlords with gross income over £50,000 must comply.
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Or your religious beliefs prevent you from using digital tools.
From April 2027: The threshold drops to £30,000.
You can apply directly to HMRC if you believe you are digitally exempt, even if you’ve already signed up for MTD but your circumstances have changed.
From April 2028: It will apply to those earning over £20,000.
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Q: What are the benefits of MTD? A: MTD is more than just a compliance requirement, it also offers numerous advantages:
Q: As a landlord, do I need to set up a dedicated bank account? A: While not a legal requirement, a separate bank account for rental income and expenses is strongly recommended. A dedicated account:
We’re here to help With offices across East Anglia, and a dedicated outsourcing team we’re committed to helping businesses of all sizes to navigate MTD with confidence .
Improved accuracy through automated calculations.
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Simplifies digital recordkeeping
Our services include:
Real-time visibility of your financial position.
MTD-readiness assessments
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Helps segregate personal and business finances
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Software setup and training
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Reduced admin and paperwork.
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Makes quarterly updates under MTD more straightforward
Quarterly reporting support
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Fewer errors and missed deadlines.
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Ongoing compliance monitoring
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Reduces the risk of errors or omissions
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Better cash flow management.
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Strategic tax planning in a digital-first environment
All of which is especially helpful when using software that links directly to bank feeds, ensuring transactions are automatically imported and categorised. Q: Can I form a Partnership with a spouse to avoid MTD? A: At present, partnerships are not included within the MTD changes. Therefore, forming a partnership with a spouse might seem like a workaround to delay or avoid MTD obligations. But it’s important to understand:
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All of which allow you to make smarter financial decisions to support the ongoing growth of your business. Digital record-keeping also helps avoid the hassle of tracking down receipts or manually entering data. And for many of our clients, MTD has been a catalyst for modernising their financial systems. Q: How to prepare for Making Tax Digital? A: Here’s five practical steps you can take now to get prepared:
We’ve already helped numerous clients to transition to MTD with tailored support, training, and software recommendations so they’re ready well before the deadline. Because we see MTD not just as a regulatory change, but as an opportunity to enhance efficiency, strengthen client relationships, and future-proof your business. To find out more about what MTD really means for you, why not join us at Colchester Rugby Club on Tuesday 18 November at 7.30am for our Making Tax Digital for Income Tax Event . Or to discuss your MTD readiness in more detail, get in contact with one of our specialist tax team by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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HMRC will eventually bring partnerships into MTD, though the start date is yet to be confirmed. Artificially restructuring ownership solely to avoid MTD could raise compliance concerns. Any partnership must be genuine, with shared responsibilities and profit entitlement.
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Assess your income to determine when you’ll be affected.
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Choose your MTD-compatible software and start using it early.
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Digitise your records and move away from spreadsheets or paper.
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Speak to your accountant to understand your obligations.
We’d always recommend seeking tailored advice before making any structural changes to your business. Q. Can’t I just use Excel? A. You can use Excel - but with caveats. HMRC allows the use of spreadsheets only if they are linked to bridging software that can:
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Train your team or get support to manage quarterly submissions.
Q: What happens if I don’t comply? A: HMRC will introduce penalties for non- compliance, including late submissions and failure to maintain digital records. While the exact penalty structure hasn’t yet been finalised, it’s clear that businesses who delay set up or don’t comply will risk fines and increased scrutiny.
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Maintain digital records
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Submit quarterly updates and final declarations
Graham Doubtfire Private Client Tax Partner graham.doubtfire@scruttonbland.co.uk 01206 417267
So this approach can be clunky and is open to errors. That’s why most people find that using MTD-compatible software (like Dext Solo or FreeAgent) is more efficient and less stressful in the long run.
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How Pre and Post-Nuptial Agreements Can Help Protect Family Wealth
With the significant inheritance tax changes announced in the last Budget, many are now turning to lifetime gifting as a solution to mitigating IHT liability.
What is a pre-nup? A pre-nup is an agreement made between two individuals before their marriage has taken place. It usually sets out how the couple would like to divide their property, and other assets should they later separate or divorce. Alternatively, a post-nuptial agreement is made between individuals who are already married and sets out exactly the same as a pre-nup. But a post-nup can be really effective when there is a significant change in one or both parties’ financial circumstances during the marriage. It’s worth noting here too that those contemplating a civil partnership can also enter into pre and post nuptial agreements and they operate in exactly the same way. Both pre-nup and post-nup agreements can ring-fence and protect specific assets from being divided in divorce, including:
From a tax planning perspective, lifetime gifting to pass on assets can be beneficial.
But how do you make sure these assets are protected in the event of divorce? We asked Matt Clemence, Head of the Family Team at Kerseys Solicitors to set out the basis of pre and post nuptial agreements and how they can be used to protect assets.
Pre-Marital assets : Anything owned by one person before the marriage, such as property, savings and investments. Inheritance and family wealth : Assets gifted or inherited, like a family business or heirlooms can be protected for future generations.
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Business Assets : Interest in a business can be defined as separate property, ensuring that a divorce does not disrupt its operation or ownership Trusts : Interests in family trusts can be ring-fenced to prevent them being considered a matrimonial asset. Assets for children : For second marriages particularly, a nuptial agreement can protect assets intended for children from a previous relationship. Future assets : An agreement can also cover how assets acquired during the marriage can be handled, such as a significant expected inheritance.
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To increase the chances of a Court upholding the pre or post-nuptial agreement though, certain procedural safeguards must be met:
Statistically, there’s been a sharp uptake in the number of couples that are entering into pre and post-nuptial agreements - with an estimated 20% of couples putting one in place. A well drafted and carefully considered nuptial agreement will undoubtedly minimise acrimony on divorce. Avoiding long drawn-out and often costly Court applications that can have a detrimental effect on the parties’ ongoing relationship, especially where children are involved. It’s worth remembering that even with a valid nuptial agreement, a UK Court’s primary concern in divorce settlement is to ensure the reasonable financial needs of both parties and any children are met. A Judge will ignore or alter an agreement if it would cause undue hardship to one spouse. Matt is Head of the Family Team at Kerseys Solicitors in Ipswich and has over 25 years of experience dealing with family law related matters. To find out more about nuptial agreements and how they could benefit you or your family, contact Matt at Kerseys Solicitors by calling 01473 213311 or email matt.clemence@ kerseys.co.uk
Independent legal advice : Each party must obtain independent legal advice from their own Solicitors before signing the document. This makes sure both parties understand the implications of the agreement. Full and frank financial disclosure : Both parties must honestly and transparently disclose all their assets, income and liabilities. Deliberately hiding assets can invalidate the Agreement. Freely entered : The Agreement must be entered into voluntarily, without any undue pressure or coercion. For prenups, this includes signing the Agreement well in advance of the wedding date – a minimum of 28 days is recommended. Fairness : The Courts overriding concern is fairness. If the Agreement is deemed significantly unfair or does not meet the reasonable financial needs of one of the parties or any children, a Judge can set it aside. Made as a Deed : The document must be in writing and correctly executed as a Deed, including being witnessed.
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Are pre-nups a legal document? Whilst pre and post-nuptial agreements are not currently binding in England and Wales, the case of Radmacher back in 2009 essentially paved the way for Courts to apply significant weighting to nuptial agreements, when considering how to divide a party’s assets.
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Trusts and Inheritance Tax: What the 2026 BPR and APR Changes Mean for You
Back in our Spring newsletter we looked in detail at how Trusts can be used to help save on your inheritance tax bill, alongside the proposed changes to Business Property Relief (BPR) and Agricultural Property Relief (APR).
W hilst many professionals they would be changed, the details were released in July with very little revisions. So, now that further guidance has been issued, Sam Mudd, Senior Tax Adviser, takes a further look in to how the changes to BPR and APR will apply to Trusts from next year. What are the changes? To recap, from 6 April 2026, BPR and APR will both apply at 100% for up to £1 million of qualifying assets, with the reliefs dropping to 50% on anything thereafter. Where both APR and BPR assets are held, the £1million allowance will be prorated based on the asset value. waited with bated breath for further details, with hope that
What does this mean for Trusts? Trusts will largely fall into 3 categories going forward:
If assets have been settled into a number of different Trusts though, then each Trust has the potential to benefit from up to the £1 million allowance, subject to holding qualifying assets. 2. Trusts created and settled between 30 October 2004 and 5 April 2026 In some cases, it may be worthwhile settling assets into Trust before April when the new rules come into place. Because whilst there are transition rules, a transfer into Trust during this period will still qualify for 100% relief on the full value (i.e. in excess of £1 million) where the relevant conditions for BPR and APR are met. The Trust will have access to a £1 million allowance going forward but it allows for significant value to be passed into Trust and the potential utilisation of a further £1million allowance. It’s also worth bearing in mind that the transitional rules mean the Trust would only benefit from a £1 million allowance, and this would apply on the first 10 year anniversary. So, whilst the qualifying assets could therefore be put into Trust, a full review would not be available on the first 10-year anniversary.
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Those created before the Budget, so on or before 29 October 2024
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Those created between 30 October 2024 and 5 April 2026
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Those set up after the new rules are in place from 6 April 2026
1. Trusts created before the Budget on or before 29 October 2024 (a qualifying pre-commencement settlement) For those pre-existing Trusts set up on or before 29 October 2024 that hold qualifying assets, the £1 million allowance will apply. However, if the qualifying property was sold prior to this date, the allowance will not be available, even if the property was held historically for a number of years. And, after 5 April 2026, a Trust that’s entitled to the allowance will only be entitled to it up to the next 10 year anniversary date. Thereafter, the allowance will be capped at £1 million (subject to the value of qualifying assets).
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We’re here to help The combination of your individual
3. Those set up after the new rules are in place from 6 April 2026 Any Trust set up from 6 April, will be governed by the new legislation. This means that on settling any qualifying assets into Trust, the 100% BPR or APR will only be available on up to £1 million. Any value in excess of this will be subject to an immediate IHT charge, albeit benefitting from 50% relief. Additionally, if any Trusts have previously been set up by the settlor then this will reduce the allowance available.
10 Year anniversary and exit charges Certain trusts are subject to 10-year anniversary charges so it’s important to consider how the new rules will impact these too. For example, those holding Agricultural property, which may generate low returns, could be left with cash flow issues when they need to fund a potential liability, but the value exceeds the allowance available to the trust.
circumstances along with those of any Trusts in place means that each situation really is unique.
It’s vital to seek advice to understand your current position, your future potential liabilities and any opportunities to maximise the relief available. So, whether you already have a Trust in place or you’re considering one for the future, get in contact with Sam or one of our team by calling 0330 058 6559 or email hello@scruttonbland. co.uk to discuss what could work best for you.
In summary these rules are complex, with many pitfalls and a wide range of implications.
Trusts have always been an excellent tool to protect assets whilst allowing Trustees to retain an element of control. But with the changes to reliefs, they could become an even more readily utilised tool to help mitigate IHT, especially with the April 2026 changes. As ever, there are a number of considerations, aside from tax, that need to be taken in to account before creating a Trust, so a full review of the position will be needed. For example, Trusts may be wound up to simplify matters and if they’ve served their purposes - such as beneficiaries reaching an appropriate age - careful consideration is needed to avoid losing any further potential benefits.
Importantly, the relief is up to £1 million but is capped at the value transferred into the Trust.
So, if £250,000 worth of Agricultural Land is transferred into Trust the allowance will be £250,000 even if the asset doubles in value. Whilst the relief available is reduced, the potential to utilise a further £1million allowance does offer an IHT planning opportunity.
Sam Mudd Senior Tax Adviser samantha.mudd@scruttonbland.co.uk 01206 417269
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Protecting Your Pension: The Impact of the 2027 IHT Rules
Keeping pension funds invested has long been a smart move for tax efficiency—but from April 2027, new IHT rules mean this strategy comes at a price. So, could life cover offer a solution?
I ndependent Financial Advisors
In April 2015, the 55% “death tax” on Defined Contribution (DC) pensions was scrapped and the beneficiary drawdown was introduced, turning DC pensions into a multi-generational tax-efficient wrapper. The government now plans to close that route.
From 6 April 2027, most unused DC pension funds and pension death benefits will be included in your estate for inheritance tax purposes regardless of your age at death. This signals a major shift in direction for investors who have, up until now, used their pension as a valuable estate-planning tool. In fact, the Office for Budget Responsibility (OBR) suggests this will mean 10,500 estates will be newly paying IHT in 2027-28. But just because the Government wants to align pensions with how other assets are taxed on death, doesn’t mean you can’t take steps to tackle the impact.
Amber River explore how insurance protection can play an important part in your pension and estate planning for the future.
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Life insurance: More than just a tax solution If you’ve skimmed the headlines lately, you’ll know life insurance - especially whole of life cover - is having a moment after the 2024 Autumn Budget. However, whilst this has been spurred on by Rachel Reeves’ efforts to balance fiscal rules and spending pledges - careful protection planning brings more benefits than just paying a tax bill. Whole-of-life cover written in trust A whole of life policy guarantees a lump sum when you die. So, by placing this policy in trust, the payout sits outside your estate and goes directly to your chosen beneficiaries or trustees.
Fixed Term protection planning An alternative is term assurance that provides cover for a set number of years, paying out a lump sum if you pass away during that time. It doesn’t have an end date, like whole of life cover, but term assurance can be a cost-effective way to help with IHT planning.
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If accelerating spending from pensions you should carefully compare the cost of protection against your income tax rates and those of your heirs.
3) Implement cleanly. Write any life policies in appropriate trusts and keep nominations/expressions of wish up to date across all schemes. For many families, the appeal of leaving pensions untouched meant leaving options on the table. Their wealth was left to grow in a tax-advantaged wrapper and could then pass flexibly across generations.
For example:
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You might use a fixed-term policy to cover a known liability, such as a gift that could create a tax liability if you die within seven years. It can provide peace of mind during that period, knowing funds are in place for your family if needed. Premiums are generally lower than whole of life cover, making it more affordable where the need is temporary.
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The 2027 IHT change doesn’t necessarily end that strategy, but it does put a price on it.
Why it works:
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Protection is the tool that buys back optionality, giving you:
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The money is available exactly when the inheritance tax bill falls due (providing premiums are maintained). Funds reach your family quickly, without waiting for probate (which avoids lengthy delays). It gives your estate breathing room, so your loved ones aren’t under pressure to make immediate decisions, like selling the family home or other assets.
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Liquidity from day one to meet IHT without forced asset sales.
In short, term protection gives your family reassurance during the years when tax risks are higher, without committing to the lifetime costs of a whole of life plan.
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Control over who receives what, and when.
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Simplicity for executors dealing with new reporting obligations and timelines.
What to start doing in 2025/26
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1) Establish your exposure. Project your potential estate value across scenarios including pension, business and agricultural assets from 2027. Include the tapering of the residence nil rate band for estates worth over £2,000,000. 2) Decide how to tackle it. Everyone’s circumstances are different with no one size fits all solution. If your plan is “leave it for the family”, consider pairing that strategy with a whole of life policy in trust. Price up the cost; remembering that age and health could create high premiums that make the policy too expensive.
If you’ve accumulated significant pension, business or agriculture wealth with an eye on intergenerational planning, then now is the time to measure the likely IHT impact and review next steps. Done well, life cover in trust not only pays a tax bill but simultaneously can preserve investment strategy, cut administration at death, and keep control with your family. This article is a general overview and not advice. Tax treatment depends on your circumstances and may change. Please seek personalised advice before taking action.
In practice, this approach provides certainty: the tax bill is met, your family keeps control of the assets you intended them to inherit, and it delivers a simple process at a difficult time. Another announcement that grabbed just as many headlines was that the 100% Agricultural Property Relief / Business Property Relief will be capped at £1m from April 2026. With any value above receiving 50% relief (effective 20% IHT).
Those affected should also be looking towards protection planning with renewed focus.
Get in touch To speak to an Amber River financial planner, call 0800 915 0000, or set up an initial appointment by visiting amberriver.com/contact
You can always spend more and give more while you’re still alive:
The disadvantages of whole of life cover Of course, it’s important to note the downsides here, as well as the upsides. Whole of life cover can be expensive, especially for older applicants, and it doesn’t reduce the IHT bill, it only pays it. And with an ever-changing tax landscape, this means the IHT liability you calculate today might be higher by the time the policy pays out, meaning regular reviews will be required to keep sums assured aligned with IHT exposure.
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Use the seven‑year gifting rule. Gifts above annual allowances are exempt from IHT providing you survive seven years. Enjoy your wealth. Try to strike a balance between living comfortably and preserving capital for heirs. Gift surplus income. Regular gifts from income that do not reduce your standard of living are immediately exempt from IHT.
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Understanding the DIY Housebuilder VAT Scheme
The UK’s DIY Housebuilder VAT
Refund Scheme offers a valuable opportunity
for individuals constructing or
converting their own homes to reclaim VAT on eligible building materials. But whilst the financial benefits can be significant, navigating the rules requires careful planning, meticulous record keeping, and professional guidance to avoid costly mistakes or HMRC challenges.
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What Is the DIY Housebuilder VAT Scheme? The scheme is designed to level the playing field between private individuals and VAT- registered developers. When a developer builds a new home, the sale is typically zero-rated for VAT. However, individuals undertaking a self-build or conversion project must pay VAT on materials and services. The DIY VAT Refund Scheme allows these individuals to reclaim VAT on qualifying goods used in the construction or conversion of a dwelling for personal use.
Some common issues we typically see include:
Ineligible items : VAT cannot be reclaimed on furniture, appliances, carpets, garden structures, or professional services like architects’ fees. Business use : Properties intended for rental, resale, or business use (including as holiday lets) are not eligible. Late claims : While HMRC may accept late submissions in some limited exceptional circumstances, generally, claims must be submitted to HMRC within six months of project completion. Multiple claims : HMRC generally permits only one claim per project. Attempts to submit supplementary claims are often rejected.
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Eligible projects include:
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Construction of a new dwelling.
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Conversion of a non-residential building into a dwelling.
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Construction for charitable purposes.
But as advisers, we frequently encounter clients who are unaware of the complexities and risks associated with this scheme. Record keeping requirements One of the most critical aspects of a successful VAT refund claim is robust record keeping. HMRC requires detailed documentation to support every claim, including:
The importance of professional tax advice Given the scheme’s complexity and HMRC’s rigorous approach, seeking professional tax advice is essential. A qualified advisor can:
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Assess eligibility and identify potential risks.
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Help compile and review documentation.
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Planning permission and building control certificates.
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Ensure correct completion of forms and meeting deadlines.
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Invoices showing VAT charged by suppliers.
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Liaise with HMRC on your behalf if issues arise.
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A schedule of costs detailing each item and its VAT amount.
Tax advisors also help clients evaluate whether the DIY scheme is the most cost-effective route. In some cases, hiring a VAT-registered contractor who can zero-rate materials and services may result in greater savings and fewer administrative burdens. We’re here to help The DIY Housebuilder VAT Refund Scheme can offer substantial financial relief for self-builders and converters, but it is not a simple rebate. Success depends on understanding the rules, maintaining thorough records, and seeking expert advice. HMRC scrutiny is high, and errors can be costly. As tax advisors, our role is to guide you through the process, mitigate risks, and make sure you receive the maximum refund to support your dream home project. The right advice at the right time can make all the difference. If you’re considering a self-build or conversion, get in contact with one of our specialist tax team by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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Proof of completion, such as a completion certificate or final inspection report.
Invoices must be originals or certified copies, clearly showing the supplier’s VAT number and the nature of the goods. Typically, after submission of a claim under the scheme HMRC request a sample of the highest-value invoices, (usually around 20) for review. Failure to maintain accurate records or submit complete documentation can result in delays, partial refunds, or outright rejection of the claim. Common pitfalls and HMRC challenges Despite the scheme’s benefits, it is not without risk. HMRC has a reputation for strict interpretation of the rules and routinely rejects parts of claims that do not meet its criteria.
PRIVATE CLIENT | SCRUTTON BLAND | 1 5
Meet the Team From creating tax-efficient solutions to protecting your assets, growing your wealth and preparing your finances for later in life - our Private Client Team have the combined expertise to take care of the financial decisions that matter to you. Get in touch with a member of our team to see how we can help you.
Graham Doubtfire Private Client Tax Partner
Sam Mudd Senior Tax Adviser samantha.mudd@ scruttonbland.co.uk 01206 417269
Kate Cowell Associate Tax Adviser kate.cowell@ scruttonbland.co.uk 01206 417270
graham.doubtfire@ scruttonbland.co.uk 01206 417267
Paul Harris Private Client Tax Partner paul.harris@ scruttonbland.co.uk 01473 945824
David Collins Senior Tax Adviser david.collins@ scruttonbland.co.uk 01206 417268
Chris Hall Associate Tax Adviser chris.hall@ scruttonbland.co.uk 01473 945828
Emma Walker Senior Tax Adviser emma.walker@ scruttonbland.co.uk 01473 945839
Simon Hurren Private Client Tax Partner simon.hurren@ scruttonbland.co.uk 01473 945822
Sterling Mayes Tax Adviser sterling.mayes@ scruttonbland.co.uk 01206 417271
In 2024, Scrutton Bland became part of Sumer – a collaboration of the best regional accountancy practices with a shared vision to champion local small to medium-sized enterprises. By bringing together the best in business services, Sumer retains the value that community-based practices offer and combines this with the scale, breadth of expertise and technologies that only a national organisation can muster.
To find out more about Sumer, visit our website: www.sumer.co.uk
0330 058 6559 scruttonbland.co.uk
@scruttonbland
0576/10/2025/MKTG
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