The number of individuals liable for dividend tax is estimated to have reached 3.2 million in 2025/26, up from 3.14 million in 2024/25, according to new Freedom of Information (FOI) figures.

The number of people having to pay dividend tax has almost doubled in the six years since 2020, when 1.81 million were liable to pay it.

The spike comes after successive cuts to the dividend tax allowance. The allowance was lowered from £2,000 to £1,000 in April 2023, then halved again to £500 in April 2024.

Around 630,000 individuals were brought into paying dividend tax when the allowance was cut from £2,000 to £1,000, according to the FOI figures obtained from HMRC by wealth management firm Quilter shared exclusively with MoneyWeek.

A further 480,000 were dragged into paying dividend tax when the allowance was cut from £1,000 to £500.

Rachael Griffin, tax and financial planning expert at Quilter, said: “These figures show how dramatically the dividend tax net has expanded in a relatively short period.

“While much attention is given to frozen income tax thresholds, the sharp reduction in the dividend allowance has quietly pulled hundreds of thousands of people into paying tax on investment income for the first time.

"The government has repeatedly said it wants to encourage greater participation in investing, but reducing the tax-free allowance has moved in the opposite direction by increasing both the tax burden and administrative complexity faced by ordinary investors,” Griffin added.

Source: Quilter

How does dividend tax work?

Dividends are paid to you if you own shares in a company. You don’t pay income tax on any dividends if your income is less than the £12,570 personal allowance.

You also receive a dividend allowance which means if you do pay income tax you can earn up to a certain amount before owing income tax on dividends. For the 2026/27 year, the dividend allowance is £500.

The tax rate you pay depends on your income tax band:

• Basic rate - 10.75%
• Higher rate - 35.75%
• Additional rate - 39.35%

As an example, if you received £3,000 in dividends and earned £29,570 in wages in the 2026/27 year, your total income would be £32,570.

Taking your personal allowance of £12,570 off this figure would leave you with a taxable income of £20,000.

As you are in the basic rate income tax band, you would pay 20% tax on £17,000 of wages, no tax on £500 of dividends because of the dividend allowance and 10.75% tax on £2,500 of dividends.

How to protect your dividends from the taxman

You can’t do much about falling dividend tax allowances, but there are ways to lower your dividend tax bill with HMRC.

Use a stocks and shares ISA

Dividends paid on investments held in stocks and shares ISAs are free from tax and don’t take up any of your £500 dividend allowance.

You can put up to £20,000 into a stocks and shares ISA each tax year.

Griffin, from Quilter, said: “Making full use of ISAs remains one of the most valuable planning opportunities available, particularly as the dividend allowance is now just £500.”

Do a ‘Bed and ISA’

If you have investments held outside a tax-wrapper, for example in a General Investment Account (GIA), you could consider transferring them across to an ISA.

The process is known as ‘Bed and ISA’, and involves selling investments in a taxable investment account and immediately buying them back inside a tax-wrapped account.

Investments transferred into an ISA will benefit from tax-free growth.

Transferring assets between spouses

You can transfer shares to a spouse or civil partner who either pays income tax at a lower rate or hasn’t utilised some or any of their dividend allowance.

By doing this, you’re effectively making the most of two sets of allowances.

Ade Babatunde, senior financial planning director at wealth manager Rathbones, said: “Sharing ownership of company shares between spouses or civil partners can allow both parties to utilise their allowances and lower-rate tax bands before higher dividend tax rates begin to apply.”

Consider alternative investments

If you’ve got the risk appetite, you could invest your money in a Venture Capital Trust (VCT).

VCTs are set up to fund younger businesses with high growth potential, and dividends and capital gains on ordinary shares aren’t taxed.

You also receive 20% income tax relief on up to £200,000 held in shares in a VCT, so long as those shares are held for at least five years.

One major drawback to VCTs is that because they invest in early-stage companies, there is a greater risk they could fail and your investments drop in value. For that reason, they can be a good option if you have maxed out your ISA and pension allowances for the financial year.

Families could be stung with a triple tax blow from next year when inheritance tax changes come into effect – but there are ways to lessen the hit.

Most unspent pensions will become subject to inheritance tax (IHT) in April 2027, which could leave some families facing IHT, an income tax bill and the loss of the residence nil-rate band allowance.

How families could be hit

Everyone has an allowance known as the nil-rate band which means estates worth less than £325,000 are not subject to IHT.

You can also benefit from a further £175,000 allowance known as the residence nil-rate band if you are passing your home to a direct descendant such as a child or grandchild.

Any unused amounts from these two allowances can be passed onto a spouse or civil partner, meaning some estates worth up to £1 million have no IHT liability.

However, the residence nil-rate band is cut by £1 for every £2 an estate is worth over £2 million.

If you are single, you lose your entire residence nil-rate band once your estate is worth £2.35 million or more and if you are in a couple you lose it all if the estate is worth £2.7 million or more.

The inclusion of most unused pensions within estates for IHT purposes from April 2027 could see more people losing their residence nil-rate bands.

Beneficiaries also have to pay income tax on any unused pension funds if the deceased was 75 or older when they died.

This means, from April 2027, some estates are facing a triple tax hit, when combining IHT and income tax on pensions, plus the loss of the residence nil-rate band.

According to calculations by insurance firm NFU Mutual, some estates may have an effective 91% tax charge on inherited unused pensions.

Adam Cole, retirement specialist at wealth management firm Quilter, said: “The prospect of some families facing an effective tax rate of over 90% on inherited pension wealth highlights just how significant the inheritance tax changes coming in from April 2027 will be.

“While these are quite extreme scenarios, many more families will find pensions that were previously outside the inheritance tax net are now contributing to much larger tax bills.”

Source: NFU Mutual

How to lower the impact from a potential triple tax blow

Gifting

Making gifts throughout your lifetime is one of the simplest ways you can lower the value of your estate, and a potential IHT bill.

There are various gifting allowances. For example, you can give away up to £3,000 tax-free each financial year to one or more people. This is known as the annual exemption.

You can also make regular gifts to people, as long as they’re made out of income and not capital and they don’t affect your standard of living.

This is known as ‘expenditure out of income’ and can include regularly paying rent for a child or adding money into an under 18’s savings account.

There are other inheritance tax allowances, plus if you give a gift at least seven years before your death, it won’t be subject to inheritance tax – unless the gift is part of a trust.

Sean McCann, chartered financial planner at NFU Mutual, said: “Making gifts during your lifetime is one of the most effective ways of reducing inheritance tax.

“While some gifts are immediately exempt, including gifts up to £3,000 each tax year and regular gifts from income that don’t compromise your normal standard of living, most others require you to survive seven years.

“In many circumstances it will be possible to take out a life insurance in trust to meet any potential inheritance tax liability on the gift.”

Take your 25% tax-free lump sum earlier

You can withdraw as much as 25% from your pension pots as a lump sum, up to a maximum of £268,275, from age 55 currently and from 57 from April 2028.

The advantage of doing this earlier is that it reduces your capital and the size of your estate.

However, there are drawbacks to taking the lump sum early, namely that the size of your pot will become smaller and there is less in there to continue growing.

Consider an annuity

Buying an annuity could be another option to lower the value of your estate.

An annuity is an insurance product which offers you a regular payment for a specific period of time in exchange for a lump sum of cash.

By buying one, you’re taking capital out of your estate and potentially lowering an eventual IHT bill for your loved ones.

Annuity rates have increased in recent years, making them a more attractive proposition. Sales of annuities have increased by 7.8% from 82,061 in 2023/24 to 88,430 in 2024/25, according to the Financial Conduct Authority.

Ed Wood, financial planning director at wealth manager Rathbones, said: “We would not advocate annuity purchases simply to avoid future inheritance tax, but the relative merits of annuity vs drawdown have slightly changed. For anyone who had previously ruled this out, it may be worth a second look.”

Many workers are snubbing pay rises amid fears of higher taxes, research suggests.

While most people would welcome higher wages, one in six (16%) have hesitated over or refused a pay rise, bonus or promotion because they were concerned they could lose out financially, according to research by Standard Life. This includes 5% who have turned an opportunity down altogether.

This is due to frozen income tax thresholds, which last increased in England, Wales and Northern Ireland five years ago and aren't set to rise until at least April 2031. The freeze is pushing people into higher tax brackets at a faster rate than if the thresholds had kept pace with inflation, which is known as fiscal drag.

The tax-free personal allowance would be £16,072 in 2026/27 had it kept pace with inflation – £3,502 higher than its current £12,570 level, Standard Life said.

The higher-rate threshold would be £64,274, rather than £50,270.

Based on this, the frozen personal allowance adds £700.36 to the annual income tax bill of a basic rate taxpayer who uses the allowance in full, Standard Life said.

It is not just higher taxes that are worrying people – they may also lose valuable tax allowances as their pay rises.

The analysis found that a fifth say paying a higher rate of income tax could make them consider turning down a pay rise, while 7% cite the risk of losing other financial support or allowances and 5% point to losing childcare support.

Neil Jones, tax and estate planning specialist at Standard Life , said: “A pay rise, promotion or bonus should be something to celebrate, so it’s concerning that some people are thinking twice because they’re worried they could end up worse off.

"It’s understandable that people want to protect valuable allowances and manage how much tax they pay, but turning down additional income without fully understanding your options could mean missing out unnecessarily.”

The risks of a pay rise

A pay rise is a good sign that your career is progressing but as you earn more, you could end up having to give up valuable tax benefits.

For example, parents could be taxed on Child Benefit payments or lose them altogether once one person in the household earns more than £60,000 under the High Income Child Benefit Charge. Under this tax, HMRC takes 1% of the total Child Benefit received for every £200 of income between £60,000 and £80,000. The money is fully clawed back at £80,000.

Basic rate taxpayers get a £1,000 per year personal savings allowance but this is reduced to £500 per year for higher earners. Additional rate taxpayers don't get a personal savings allowance.

There are more allowances lost once you earn above £100,000.

For instance, you lose eligibility for tax-free childcare once you earn above £100,000.

Plus, for every £2 you earn over £100,000, you lose £1 of your standard £12,570 personal allowance, dropping to zero once your income reaches £125,140.

This creates an effective 60% tax rate on taxable income between £100,000 and £125,140.

How to cut your income tax bill

There are several tax-saving strategies to consider before rejecting a pay rise.

The first recommendation is to increase pension contributions.

If your employer offers salary sacrifice, increasing pension contributions can reduce your taxable income while putting more into your pension.

Jones said: "This can be particularly useful if a pay rise takes you into a higher tax band or across another important income threshold. You may also pay less National Insurance (NI) than if you took the additional salary as cash."

The rules around pension salary sacrifice are due to change from April 2029 with a £2,000 cap being introduced on NI relief.

Pension contributions also benefit from tax relief. Basic rate taxpayers effectively receive 20% tax relief, while higher and additional rate taxpayers can qualify for relief at 40% and 45%. Depending on how contributions are made, the additional relief may need to be claimed from HMRC, so it’s worth checking you’re receiving what you’re entitled to.

Beyond pensions, you could also reduce your taxable income by making use of company benefits such as gym membership or a car scheme that may be available to fund through salary sacrifice.

Charitable donations can also reduce your taxable income and it may be worth changing the timing of how or when you receive a bonus.

Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning, said: “The answer is planning, not earning less.

“When workers genuinely consider refusing career progression because of tax, policymakers should be asking whether the tax system itself has become part of the problem.”

Almost one in 10 people in the UK own cryptoassets, but HMRC suspects tens of thousands are failing to pay tax on them properly.

According to the Financial Conduct Authority (FCA), 8% of UK adults held cryptoassets in 2025, up from 4% in 2021.

However, there’s concern some crypto investors don’t understand the tax implications of receiving, holding and selling these assets.

HMRC sent out 81,000 warning letters to crypto investors it suspected of underpaying tax in 2025/26, according to a Freedom of Information (FOI) request by accountancy firm UHY Hacker Young, up from 65,000 in 2024/25 and 27,700 in 2023/24.

Neela Chauhan, a partner at the firm, said: “A lot of the traders are young, have had little previous exposure to HMRC and often work under the assumption that HMRC has limited visibility over their activities.”

Recent FCA research found UK-based crypto investors tend to be younger, with 15% of 18 to 34-year-olds owning cryptoassets versus 9% of 35 to 54-year-olds.

Chauhan added: “The tax treatment of cryptocurrency in the UK is complex, and many individuals do not fully understand their reporting obligations or recognise when transactions give rise to taxable income or gains that must be disclosed to HMRC.

“Crypto investors often forget that you may still have made a taxable gain even when you are swapping one cryptocurrency for another and might not be aware that the income you can earn by lending cryptocurrencies is taxable.”

When you might owe capital gains tax cryptoassets

You may be taxed when you dispose of cryptoassets for gain or profit, as is the case with other assets like stocks or shares.

Disposing of a cryptoasset involves selling it, exchanging it for another type of cryptoasset, using it to pay for goods or services or giving it to another person, unless that person is a spouse, civil partner or you are giving it to charity.

Different types of cryptoasset, such as Bitcoin and Dogecoin, are typically treated as separate assets and gains need to be calculated on each type individually.

Everyone receives a capital gains tax (CGT) allowance of £3,000 each financial year. This means you can make up to £3,000 in capital gains without owing any CGT.

If you make more than this allowance in gains when disposing of assets, including cryptoassets, you will likely owe CGT.

Typically, the gain made is calculated by working out the difference between what you paid for the asset and what it sold for.

However, sometimes you have to use the market value to work out a gain, for example if you have cryptoassets that have been transferred between ‘connected persons’ – such as a spouse or civil partner.

How to report and pay cryptoasset capital gains

You can report gains on cryptoassets by either completing a self-assessment tax return at the end of the tax year or by using the CGT ‘real time’ service.

If you’re reporting your gain on a self-assessment return, you should complete it in pound sterling within the cryptoasset section.

You can use the real time CGT service to report assets sold in the current or previous tax year.

When working out your gain you can deduct certain allowable costs. This includes transaction fees (exchange or trading fees) and costs incurred for advertising a cryptoasset for sale.

You can also offset capital gains made from cryptoassets with capital losses, but you must report these losses to HMRC.

Meanwhile, if you’ve paid income tax on a cryptoasset, you won’t pay CGT on that amount. You may have to pay CGT when you come to dispose of that asset though.

Once you’ve reported any gains, HMRC will send you a letter or email with a payment reference number starting with ‘X’.

You use this reference when paying the tax, either through the online tax payment service or through online banking or cheque.

You have to report any gains by 31 December in the tax year after you made them, and pay by 31 January.

For example, if you made a gain in the 2025/26 tax year, you would need to report it by 31 December 2026 and pay the gain by 31 January 2027.

When you might owe income tax on a cryptoasset

You may also owe income tax on cryptoassets if you received them in a specific way.

Mining

‘Mining’ involves helping to solve difficult mathematical problems and maintaining a cryptoasset network, for which you can earn rewards.

HMRC generally treats income made from mining as trading or miscellaneous income which means it’s subject to income tax.

Staking

‘Staking’ is when you temporarily lock up your cryptoassets to keep a blockchain network running. In return, you can earn extra cryptoassets as a reward.

Like mining, you have to pay income tax on these earned cryptoassets.

Airdrops

A cryptocurrency airdrop is when someone is given free tokens, sometimes as part of a market or advertising strategy to raise awareness of a new digital currency.

You may also receive airdrops for answering a survey or helping promote a digital currency through social media.

Typically, if you received airdropped cryptoassets in return for a service, you will owe income tax.

Employment income

If you receive cryptoassets as income from an employer, they count as ‘money’s worth’ and the value of the asset will be subject to income tax.

Allowance for money earned through trading income and miscellaneous income

You receive a £1,000 allowance per year for trading income or miscellaneous income.

This can apply to income earned through mining, staking and airdropping, so income tax would only apply on income above this threshold.

Stamp duty land tax is another cost to factor into the equation when buying property in England or Northern Ireland.

It is applied at different rates depending on the value of the property, if the home you’re buying costs more than £125,000. That threshold rises to £300,000 for first-time buyers purchasing a home worth £500,000 or less.

The average house price in England was £292,095 as of May 2026, according to the latest data from HM Land Registry, meaning the typical mover would pay around £4,604 in stamp duty.

A first-time buyer would not have to pay any stamp duty for the same transaction.

Regional house price variation means the average amount of stamp duty is drastically different depending on where in England you are moving to, with analysis of home buyer enquiries across England in the first half of 2026 by Zoopla showing a stark North-South divide.

Around half of all first-time buyers in London, the East of England, and South East England have to pay stamp duty, compared to just 10% in the north of England as property prices in these regions eclipse those in the north.

The story is not much different for home movers. While almost all of those buying their next home in England have to pay some stamp duty, the amount they pay on average is very different.

The amount you’ll pay in the north of England will typically be between £1,500 and £2,200, while in some parts of the south, stamp duty bills can rise to almost ten times this.

Richard Donnell, executive director at Zoopla, said: “For home movers, stamp duty is a near-certain cost wherever you live – and in Southern England it runs to five figures. Six in ten property purchases are made by existing homeowners.

“When the cost of moving becomes a meaningful friction, some of those moves don't happen, especially with lower levels of house price inflation in recent years across southern England.”

The analysis did not include the data for buyers in Northern Ireland.

Average stamp duty costs by region for first-time buyers

If you’re buying your first home and it’s worth £500,000 or less, you could benefit from first-time buyers' relief. This means you’d only pay stamp duty on any portion of the property value over £300,000, at a rate of 5%.

The difference in house prices across regions means many first-time buyers in certain parts of England may not need to pay any stamp duty on their first home, or pay relatively low amounts.

Only 2.1% of first-time buyers face a stamp duty bill in the North East, Zoopla said, and for those who do, the median stamp duty bill is £3,750.

In Yorkshire and the Humber, 3.8% of first-time buyers pay stamp duty. This rises to 6.2% of first-time buyers in the North West and 9.3% in the West Midlands. The median bill in all of these locations for first-time buyers is £2,500.

As average house prices in London, the East and South East of England are much higher than elsewhere in the country, first-time buyers’ relief is less generous. In each of these regions, over 50% of first-time buyers have to pay stamp duty.

This percentage peaks in London, where around 80% of all first-time buyers pay some stamp duty.

The average stamp duty bill for a first-time buyer in the capital is £8,750, while it’s £5,000 in the South East, and £4,500 in the East of England.

Average stamp duty costs by region for home movers

Almost all home movers will have to pay stamp duty when they buy their next house – but the amount they have to pay depends on property value.

The North East region has the fewest home movers paying stamp duty, though a majority still pay it (63%). The amount paid is relatively low, though, with an average bill of £1,500.

It reflects how the North East is the cheapest region in England for house prices, as the average house costs just £163,933, according to HM Land Registry, more than £100,000 less than the average for England.

Between 82% and 92% of home movers pay stamp duty in the other northern regions, the Midlands, and the South West.

The highest average stamp duty bill among these regions is the South West, where the typical home mover will pay £5,000.

These numbers steeply rise in London, the East and South East of England. The typical home mover will pay around £10,000 in stamp duty in the East of England, £11,250 in the South East, and an eye-watering £20,000 in London.

Almost all home movers pay stamp duty in these regions too.

How stamp duty is paid

Stamp duty is due in England when the price of the home you are purchasing is above the tax-free threshold.

Home movers have to pay stamp duty on properties worth over £125,000 and the amount you pay depends on the price of the property. The table below shows the rates at which it is levied.

If you already own a residential property and are buying a new one, you’ll usually have to pay 5% on top of these stamp duty rates, if it means you’ll own more than one home.

First-time buyers have a larger tax-free threshold of £300,000, and pay slightly different rates of stamp duty. These are shown in the table below.

You will have to pay the full stamp duty amount to HMRC within 14 days of buying your property.

After years of being told to spend our pensions last because they could be handed down free of inheritance tax, a new rule coming in from next April flips that guidance on its head. From 6 April, 2027, most unspent pensions passed on will be included in the estate for inheritance tax (IHT) purposes and could be taxed at 40%.

The move has triggered a big change in behaviour, with many over-55s (the earliest you can currently take your pension) withdrawing more of their money sooner rather than later, often to help out younger generations. Experts are cautioning about knee-jerk financial decisions, however.

Michelle Holgate, director and wealth manager at RBC Brewin Dolphin, said: "The inclusion of pensions in estate calculations for inheritance tax purposes from April 2027 is already reshaping how clients and advisers are approaching planning conversations.

“For some retirees, the instinct to act quickly by drawing down a pension and gifting the proceeds to children is understandable, but there are a number of important considerations.”

Record pension withdrawals

In the 2025/26 tax year, £22.4 billion in taxable payments was withdrawn from pensions flexibly – marking a new record, according to HMRC. This has increased by £3.8 billion in the previous financial year (2024/25). It is also up by £7.1 billion since 2023/24.

Much of this money is being given away to younger generations as gifts during their parents or grandparents’ lifetime. More than half of first-time buyers received financial help from family in 2025, for example, amounting to a total of £8.3 billion, according to research by estate agency Savills.

At the same time, just over two thirds (67%) of parents and grandparents already funding private school or university costs say the inheritance tax change is motivating them to provide further financial support during their lifetime, a separate survey of 1,010 people in May 2026 by Rathbones found.

“More clients are choosing to help children and grandchildren now – whether that’s supporting housing, education or other financial needs – rather than waiting for assets to pass on death,” said Ross Coombes, senior financial planning director at Rathbones.

“For many, the ability to see the impact of that support during their lifetime is a key motivation, alongside the tax considerations.”

Gifting – things to consider

1. Care costs

Before taking any action, experts said it is important to be realistic about your retirement needs and health so you can plan around how much money you are likely to need during your lifetime.

Giving away lump sums may cause issues further down the line if you need to rely on local authority support to meet care costs. The rules on ‘deliberate deprivation of capital’ may mean that the local authority may seek to recover their extra costs from you or those you have made the gift to.

Nick Clark, chartered financial planner at Lubbock Fine Wealth Management, said: “If you make large gifts or spend your tax-free lump sum too quickly, you cannot get that money back later in your retirement when you might need it most – and you may face undue tax liabilities during your lifetime.”

2. Income tax

Pulling large amounts from your pension to avoid your loved ones paying an IHT bill tomorrow could leave you with a big income tax bill today.

“While up to 25% of any withdrawal may be tax-free, the balance is added to your other income in that tax year. For some this may mean they pay 40% (or 45%) on some or all the taxable amounts [of the pension withdrawal],” said Sean McCann, chartered financial planner at NFU Mutual.

Becoming a 40% (or 45%) taxpayer has other knock-on consequences, such as a reduction in the tax-free savings allowance of £1,000 to £500 if you become a 40% taxpayer and complete loss if you move into the 45% band, he added.

Some of the other consequences of moving up a tax band include paying a higher tax rate on dividend income (if you have used your £500 a year dividend allowance) and the loss of the marriage allowance (if your spouse or civil partner claimed it) if you’re no longer a basic rate taxpayer.

If the taxable pension lump sum together with your other income means you breach £100,000 of taxable income per year, you begin to lose the tax-free personal allowance. “In which case, anything between £100,000 and £125,140 is effectively taxed at 60%’’, McCann said. This is known as the 60% tax trap.

Taking more than the 25% tax-free allowance will also trigger the Money Purchase Annual Allowance, restricting future gross annual contributions to a maximum of £10,000.

3. Inheritance tax

Inheritance tax is one of the most feared but least understood taxes. The rules can be tricky to navigate so it may be worth speaking to a professional financial adviser, but there are some key things to remember.

First up is the seven year rule. ‘’Lump sum gifts remain in the estate for seven years – they effectively ‘eat’ the £325,000 tax-free allowance first. The reduction if you die between years three and seven only applies if more than £325,000 gifted’’, said McCann. In some cases, earlier gifts also need to be reviewed. Ensuring the history of gift making is properly analysed is essential and easily overlooked.

Gifts from regular income, which don’t impact normal standard of living, are free of IHT immediately. McCann said many people are buying annuities and giving away excess income, “in the knowledge they can stop the regular gifts if their circumstances change’’. Keeping good records of the gifts are essential, though.

You can also give away up to £3,000 each tax year and carry forward any unused allowance for one year, via the annual exemption. Used consistently it can make a meaningful difference, provided clear records are kept, Tony Cockayne in the disputed wills and estates team at law firm Michelmores says.

Marriage and civil partnership gifts can be exempt, but only within set limits: £5,000 from each parent, £2,500 from each grandparent or great-grandparent, £2,500 between the couple, and £1,000 from anyone else.

The gift must be made before the ceremony and conditional on it taking place, so leaving it until afterwards risks losing the exemption, Cockayne warns.

Inheritance tax (IHT) receipts are on the up and expected to rise further as more estates are dragged into HMRC’s net.

The government raked in £8.5 billion in inheritance tax receipts in 2025/26, with the Office for Budget Responsibility (OBR) forecasting the tax take will increase to almost £15 billion by 2030/31.

The watchdog says rising equity and house prices, frozen tax thresholds and the impact of policies announced in the 2024 Autumn Budget, namely unused pensions falling under the scope of IHT from April 2027, will, in part, cause the rise.

It means families may want to take steps to ensure their estate’s eventual IHT bill is as low as possible.

Unfortunately, many are still making six costly mistakes, says Clare Moffat, pensions and tax expert at retirement firm Royal London.

1. Not knowing the implications of cohabiting vs. marrying

Every person receives a £325,000 tax-free threshold, known as the nil-rate band. Any portion of the estate over this threshold could be subject to IHT.

For example, if you died and your estate was worth £300,000, there would be no IHT liability.

If you have a husband, wife or civil partner and you die, any unused nil-rate band is passed to them, taking their threshold up to a potential £650,000.

If a property is being passed to children or grandchildren, there is an additional residence nil-rate band of £175,000 which can be transferred as well, potentially taking someone’s IHT-free allowance to £1 million.

However, these bands can only be transferred if you’re married or in a civil partnership, rather than if you’re cohabiting with someone.

Moffat says: “For me, this tops the list of mistakes that people can make if they're in a long-term relationship.

“This means unmarried couples are potentially missing out on a total of £1 million in inheritance tax exemption.”

2. Not making the most of exemptions during your lifetime

There are a host of exemptions and allowances which mean you can gift money during your lifetime and it won’t fall into your estate for inheritance tax purposes.

For example, you get a £3,000 annual exemption each year. If you didn’t use it all in the previous tax year, you can carry the unused allowance forward to the next – but only for one tax year.

You can also donate £250 cash gifts to as many people as you want per tax year, unless you have used another allowance, like the annual exemption, on that person.

You can also gift an unlimited amount of money, so long as it is made out of ‘surplus income’ – that is money from pensions, rent or dividends – and it doesn’t reduce your standard of living.

Gifting money out of surplus income could become a useful way to reduce inheritance tax liabilities when unused pensions fall under the scope of IHT from April 2027.

Moffat says: “Gifting during life is not for everyone but for people who know that they will have more than enough to live on when they're retired, the benefits are that it can help family when they need it most, be stopped at any time and you don’t need to worry about the seven-year rule.”

The seven-year rule means you can give away as much of your estate as you like during your lifetime, and if you live for another seven years the gifts won’t be subject to IHT.

3. Not keeping records

Keeping detailed records of any gifting throughout your lifetime will make it easier for the executors of your will to evidence it when they have to pay the IHT bill.

A lot of people don’t do this. Research from financial firm Canada Life found 54% of over 55s who had given a financial gift in the previous seven years had kept no record of it.

Executors need to fill in the IHT400 form upon someone’s death to report the full value of their estate. The IHT403 form has to be filled in alongside it to disclose lifetime gifts.

Delays in this form-filling process can mean a longer wait for probate to be granted and can increase the risk of queries from HMRC, prolonging the closure of the estate.

4. Not having important conversations

IHT disputes among families are on the rise, so having honest conversations with loved ones has never been more important.

This can prevent legal costs racking up and delays in probate being granted, leaving you unable to deal with the estate.

Moffat says: “Having good, open conversations about gifts or what a person's wants and wishes are for what's to happen after their death could prevent costly legal action at what is a difficult and emotional time for family, friends and loved ones.”

5. Forgetting the £2 million taper

The residence nil-rate band starts to reduce by £1 for every £2 your estate is worth more than £2 million.

Once someone’s estate reaches £2.35 million, the £175,000 residence nil-rate band is lost completely. A surviving spouse completely loses their residence nil-rate band once their estate breaches £2.7 million.

Moffat says: “For people who might be close to this bracket it's important to know this as they'll need to keep an eye on how much their total estate will be worth.

“They could take steps to reduce it to below £2 million using some of the options to gift during their lifetime, meaning the residence nil-rate band is available again.”

6. Not considering where inheritance tax should be paid from

If you make a larger gift which is not covered in the gifting exemptions and exceeds your inheritance tax allowance, for example to a child or grandchild to buy a house, and then die within seven years, IHT could be owed on that gift.

The beneficiary of the gift may not be able to pay this bill if it comes unexpectedly, the gift is tied up in property or has already been spent.

To reduce the risk of this, the donor of the money could take out a ‘gift inter vivo’ life insurance policy. This would cover the cost of the eventual IHT bill for the beneficiary, should you die within seven years.

Typically, these policies pay out less over time, as taper relief is applied to the IHT liability depending on when a gift was made.

For example, if you make a larger gift and die less than three years later, it would be taxed at 40%, but if you die six to seven years later, the rate drops to 8% on the gift.

Younger people faced with historically high housing prices and ongoing cost of living pressures may be hoping an inheritance will help them out.

Nearly one in four (23%) Gen Z (born between 1997 and 2012) say they are not prioritising retirement saving because they expect to inherit money or property.

This view is also common among Millennials (born between 1981 and 1996), with one in five (20%) of this generation saying the same, according to a Standard Life survey of 6,000 people conducted in June 2026.

Grandparents who have benefited from house price increases and may be enjoying bumper pensions, and who are worried for their younger loved ones’ financial prospects, could feel pressure to give away their homes to grandkids now, in an attempt to reduce the risk of them paying inheritance tax later.

Experts have said it’s trickier than just handing over the keys, however.

How much can I give away free of inheritance tax?

To quickly recap on the key inheritance tax rules – every homeowner has two inheritance tax-free allowances.

You have a nil rate band of £325,000 and there is a residence nil rate band of up to £175,000 when a family home is passed to direct descendants, including grandchildren, though this second allowance is tapered for estates above £2 million.

Married couples and civil partners can inherit each other’s allowances, meaning up to £1 million may be passed on by them after death before IHT becomes due.

Also, most gifts a person makes during their lifetime are exempt from inheritance tax – but the person must survive for seven years after giving it (these are known as ‘potentially exempt transfers’).

A gift can be money, property or possessions – anything that has value. A gift must reduce the value of the estate and you must include any loss incurred as part of the gift. For example, if a person sells their house to a child for less than it’s worth, the difference in value counts as a gift.

An outright gift is where value is transferred to another individual without conditions.

Losing legal control

Many people assume giving away their home – often one of their most valuable assets – is a straightforward way of reducing inheritance tax. The reality is often far more complicated.

Legally there are a number of things to consider.

When the original owner gives their property away, they lose legal control over it. This is true whether the original owner remains living in the property or not – but several factors mean it can be especially tricky if they continue to reside there.

Laura Walkley, partner and head of the private client department at TWM Solicitors LLP, said: “Even where there is complete trust between family members, circumstances and relationships can change over time. In a worst-case scenario, the original owner could lose their home.”

Four key scenarios could put the person giving away the property at risk, Walkley pointed out; disputes, debt, divorce and death.

1. The donor and recipient could fall out, and the recipient may decide to evict the original owner or to sell the property.
2. The recipient might also need to borrow against it, exposing the property to claims by creditors.
3. If the recipient goes through a divorce, the property may be vulnerable to claims for financial provision by a former spouse.
4. If the recipient dies before the person who made the gift, unless suitable arrangements are put in place, the property will pass under the recipient’s will or intestacy, potentially ending up in the hands of people the donor never intended to benefit.

Inheritance tax property gifting rules

Giving your home away while continuing to live in it is also one of the biggest inheritance tax misconceptions – it doesn’t automatically mean your loved one avoids inheritance tax.

Shaun Moore, tax and financial planning expert at financial advice firm Quilter, said: “If you gift a property but still benefit from living there, HMRC will treat it as a 'gift with reservation of benefit'. This means the property would still be counted as part of your estate for inheritance tax purposes.”

To avoid this, you would typically need to pay a full market rent to the new owner, plus your share of the bills. This creates its own complications and could generate an income tax liability for the recipient, who would also need to declare that rent on their annual tax returns.

You do not have to pay rent to the new owners if you only give away part of your property and the new owners also live at the property.

There’s normally no inheritance tax to pay if you move out and live for another seven years.

Capital gains tax problem

Grandparents with more than one property who want to give one away to a grandchild could also find there may be capital gains tax implications if the property is not the giver’s main residence.

Only a person’s private residence is exempt from capital gains tax. “So, if I gifted a buy-to-let, for example, the gift is viewed as a disposal for CGT purposes that realises any gain made,” said Moore.

This triggers an immediate CGT bill. Even if you receive no money for the property, you must pay capital gains tax on the difference between what you originally paid for it and what it is worth on the day you gift it.

Care costs

Permanently giving away your home could also create headaches if you come to need care in later life. You won’t be able to sell your home or use equity release, for example, to unlock some of your housing wealth to pay for your care.

At the same time, under deprivation of assets rules, local authorities could scrutinise gifts made later in life if they believe assets have been transferred primarily to avoid care costs.

Consequently the council may be reluctant to pay for your needs or even demand money back from the grandchild you gave the property to.

Alternatives to grandparents giving away property

Before taking the huge step of giving away your home (or another property) to your grandchildren, it is important to establish whether gifting property before death is even necessary.

Tom Kimche, financial adviser at Netwealth, said: “Outside of property, there are several other ways to gift which could be a better fit during your lifetime.

“For example, beyond the annual £3,000 gifting exemption, gifts from surplus income can often fall outside the scope of IHT if properly structured and documented.

“Larger gifts can also leave your estate for IHT purposes if you survive for seven years after making them.”

Structure is another important consideration. Gifts can be made directly or through relatively simple structures such as bare trusts.

“If you would like greater control and asset protection, discretionary trusts or Family Investment Companies (FICs) may be worth considering, though they add cost, complexity and additional tax considerations,” said Kimche.

Indigo Point, Great Camanoe, British Virgin Islands

A modern estate with three properties surrounded by landscaped gardens. There are no corporate or personal income taxes, or capital gains or inheritance taxes to pay. 2-bedroom main villa, 1-bedroom owner’s cottage, 1-bedroom guest cottage, pool, 2 boat slips, 4.4 acres.

Price: $5.5m Hamptons 020-8618 4551

Bolivia Mount, The Dhoor, Lezayre, Isle of Man

A distinctive property built in 1820 and surrounded by formal gardens and woodland. The Isle of Man operates a low-tax regime with low fixed income-tax rates and no capital gains, inheritance or wealth taxes. 6 bedrooms, 3 bathrooms, 3 receptions, 42.3 acres.

Price: £6.95m Knight Frank 020-7861 1065

Seaside Drive, Guana Cay, Abaco, Bahamas

An ocean-side residence featuring bright interiors with vaulted beamed ceilings, wood floors, floor-to -ceiling windows and an open-plan living area. The Bahamas operates a zero-tax jurisdiction with no personal or corporate income taxes, capital gains, wealth or inheritance taxes. 3 bedrooms, 3 bathrooms, gardens, tennis court, 2.1 acres.

Price: $4.8m Bahamas Sotheby’s International Realty +1 242 367 5046

Courtil Brock, St Peter Port, Guernsey

A fine Regency villa built in 1810, surrounded by landscaped gardens that include an English oak planted by the first owner in 1812. It has 12-foot high ceilings, grand fireplaces, shuttered sash windows, panelled walls and French doors leading onto the south-facing terrace. Guernsey levies a flat 20% personal income tax, and there are no corporate, capital gains, inheritance or wealth taxes to pay. 5 bedrooms, 6 bathrooms, 3 receptions, library, cinema.

Price: £4.9m Savills 01481-713463

Ordino, Andorra

A mountain home in Ordino in the Pyrenees. Although not strictly a tax haven, there are no wealth, inheritance or capital gains taxes to pay. The house has beamed ceilings and a partly covered terrace for outdoor dining. 4 bedrooms, 4 bathrooms, wine cellar.

Price: €3.15m Lucas Fox +376 775 077

Derry Farm, La Route Du Francfief, St Brelade, Jersey

A restored country house with modern bright interiors that retain original features, including marble fireplaces. The gardens include a stream and a swimming pool. Jersey imposes no capital gains, inheritance or corporate taxes, and has a fixed income-tax rate of 20%. 4 bedrooms, 3 bathrooms, 2 receptions, library, 2-bedroom self-contained cottage, 1-bedroom flat.

Price: £7.75m Knight Frank 01534-877977

Shoreview Point, West Bay, Cayman Islands

A renovated home in a gated community, with its own dock on a canal leading out to the ocean. The interiors have marble floors, large picture windows and French doors leading onto the garden and pool. The Cayman Islands has a “tax neutral” status and levies no corporate, income, capital gains or property taxes. 4 bedrooms, 4 bathrooms, reception.

Price: $3.75m Savills 020-7016 3740

Lorne House, Castletown, Isle of Man

A grand Georgian estate, which was originally the official residence of the island’s lieutenant governor. The property has landscaped gardens, orchards and paddocks and a restored walled garden overlooking Castle Rushen, a medieval coastal castle. The Isle of Man operates a low-tax regime with low fixed income-tax rates and no capital gains, inheritance or wealth taxes. 8 bedrooms, 5 bathrooms, 4 receptions, 6.5 acres.

Price: £6.85m The London Broker 020-7193 9969

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Inheritance tax (IHT) has long been dubbed Britain’s most-hated tax, despite only affecting a small chunk of the population. That’s changing though – more people are on track to be hit by the 40% levy in coming years.

Rising house prices and frozen inheritance tax thresholds mean more families have and will be brought into the IHT net each year, known as fiscal drag.

The issue is set to worsen when pensions are included in the estate for inheritance tax from April 2027.

In the tax year 2023/24, 4.72% of UK deaths resulted in an inheritance tax charge, acording to latest HMRC data – an increase of 0.10 percentage points to the previous year. The proportion of estates paying inheritance tax is now the highest it has been since 2006 to 2007, when it was 5.96%.

A total of 30,400 deaths in the UK led to an IHT charge, with the average bill for IHT-paying estates standing at £231,000. Inheritance tax receipts in that period reached £7 billion, up 5% compared to the previous year.

Inheritance tax raised £8.4 billion in 2024/25 for the taxman, the Office for Budget Responsibility (OBR) said. It expects this to increase to £14.7 billion in 2030/21 due to factors such as the fiscal drag, the £2.5 million cap on 100% agricultural property relief and business property relief which came in in April 2026, and making pensions as part of an estate.

With more people facing inheritance tax in the future, here's how can you plan ahead now.

Can you make use of gifting allowances?

The standard inheritance tax threshold is £325,000, and this can be raised to £500,000 if you give your home to your children or grandchildren – provided your estate is worth less than £2 million. There are ways to reduce an inheritance tax bill though, such as through lifetime gifting.

Giving gifts can reduce inheritance tax liabilities as, if done right, they won’t be included in the estate. There are a number of allowances, such as the annual exemption, which lets you give a total of £3,000 of gifts each year without them being added to the value of your estate. You can give the whole £3,000 to one person, or divide it among different people. If this allowance wasn’t used in the tax year, it can be carried forward to the next – but only for one tax year. There are also gift allowances for weddings and civil partnerships.

Significantly larger gifts given during your lifetime could also potentially be exempt from inheritance tax. Known as the seven year rule, if you live for seven years after giving a gift, no IHT is due on it – unless the gift is part of a trust. The inheritance tax rate tapers off after three years – so even if you die within those seven years, the rate your loved one has to pay on the gift could be less than full whack (40%). The problem with the seven year rule is you likely won’t know your life expectancy, nor how much money you will need in the future, for example to pay for care.

You can also give away £250 per year to as many people as you like, known as the small gifts exemption, as long as the recipient hasn’t already benefited from the annual exemption that year.

Other gifting allowances also apply – you can give as much away as you’d like in regular payments to another person as long as you do not leave yourself short and the money is from monthly income.

If you can afford to, gifting during your lifetime could mean less of your money is subject to inheritance tax in the future. Plus, it could mean you get to see how your hard-earned money makes a difference to your loved one’s life. Though, it could be worth getting advice, as there are nuances to rules to be careful about.

Don’t avoid the inheritance conversation

Avoid talking about money, politics and religion at the dinner table, that’s how the unwritten rule goes. Conversations about inheritance may feel uncomfortable, but having these discussions are crucial.

Speaking about your plans for your estate while you’re alive means you can communicate your wishes to loved ones directly and address any concerns.

You can prepare a side letter explaining how you have arranged your will, which could help avoid disappointment or disputes after your death. It can reduce the risk of any nasty financial surprises while they’re grieving, and give them the opportunity to understand your decisions.

Make sure you keep the paperwork

Keeping a paper trail is important when it comes to inheritance tax.

If you’re in the position to give away your money, then make sure you keep a record – and put it in a safe place. Planning ahead is all well and good, but if HMRC comes knocking, your loved ones may need to show evidence.

At the same time, keeping a record of financial and personal details for after you’re gone could be incredibly useful for your loved ones after you die. Royal London has put together a “when I’m gone list” which covers where friends or family can find important documents, as well as your funeral wishes. Make sure you let your loved ones know it exists and where you keep it.

What is a land value tax?

A land value tax is an annual levy paid on the value of the land upon which a property – or no property – sits, rather than a tax on the property itself. The basic idea is that land gets its value from location, rather than the calibre of the development that sits on it. And what gives a location value is what is going on around it. Is it close to the centre of a city? Is it in an area with great transport links, good schools, beautiful parks, hospitals and so on? Generations of taxpayers paid for all that civic infrastructure and a land value tax is a fair and efficient way of taxing what economists have called the “unearned betterment” part of the value of a property – that is, the rise in value that has nothing to do with the owner's efforts and everything to do with the state and community.

Is a land value tax a new idea?

Not at all. Land value taxes have their roots in the ancient principle that people enclosing common land for agricultural use had a duty to share some of the resulting crops. In Anglo-Saxon England, the unit of land measurement called the hide (around 120 acres) was used to assess people's liabilities and obligations for such things as the maintenance and repair of bridges, fortifications and manpower for the army. A thousand years later, in The Wealth of Nations (Book V, chapter 2), Adam Smith argued in favour of a land tax on the grounds that it would fall on the owner of the land and not harm other economic activity. “Nothing could be more reasonable,” he concluded. David Ricardo, too, was a strong advocate. More recently, the most famous proponent of a land value tax was the late 19th-century US journalist and free-trade campaigner Henry George. Winston Churchill was a big fan, too.

Why is a land value tax so popular?

It's one of those interesting ideas (such as universal basic income or congestion pricing) that attracts support from a strikingly broad range of voices. Left-wingers are attracted to land value taxes because they capture unearned rents and reduce inequality from land ownership. Free-market liberals are keen because land value taxes are seen as highly efficient and tax a fixed resource without discouraging work or investment. The key point in favour is that such a tax “allows us to raise more money from the unproductive rich without disincentivising the productive rich”, says David Goodhart on Substack. Andy Burnham, during his first bid for the Labour leadership in 2010, backed the policy as “aspirational socialism”. Milton Friedman – guru of the “neoliberalism” so disdained by the new PM – also supported it as the “least bad tax”.

Why did Milton Friedman call it the 'least bad tax'?

Because if states must tax – and they must – then it's best that they do as little damage as possible to incentives that promote growth and enterprise. Income taxes disincentivise employment. Taxes on profits make businesses invest and trade less. But the supply of land is fixed: no tax increase will result in there being less of it. And “even the most tax-shy landlords cannot take their acres offshore or dodge the tax with legal jiggery-pokery”, says Edward Lucas in The Times. Moreover, a land value tax “stimulates growth by penalising inactivity. Landlords pay the tax anyway, so they had better make use of their land, or sell it, dropping the price if necessary” – and selling to more productive owners. Land value tax, in other words, helps tackle “grey belt” decay and discourages land hoarding and speculation, smoothing out booms and busts.

How high should the land value tax be?

Another proponent is Dan Neidle, the City lawyer turned tax reform campaigner. He supports scrapping stamp duty (which harms growth and labour flexibility by discouraging people from moving house); council tax (out of date, unfair and under-taxes the very rich); and business rates (arbitrary, stifle growth and stoke perverse incentives). To replace the £100 billion these three dreadfully designed property taxes bring in, Neidle's Tax Policy Associates think tank proposes a land value tax set at around 1.3%. Other groups have proposed models at between 0.48% and 1%. Stamp duty and council tax between them account for roughly £57 billion. At the 1.3% rate, at least 63% of people would be better off immediately (compared with council-tax payments), and in the long run the boost to the economy would make it a win-win for all.

What would a land value tax mean for homeowners?

In the short run, millions of homeowners in southern England would be looking at gigantic new annual tax bills. And that's not the only reason why land value taxes are a tough sell, politically. Initial implementation is tough, since the scope for disputes and legal challenges against a levy on a hypothetical value is clear. And opponents worry the tax would be unfair on asset-rich but low-income homeowners, especially the elderly. Without some kind of lengthy phasing in, a land value tax would constitute a one-off windfall tax on the current generation of land owners, since once they are introduced, land values would fall to reflect future tax liabilities. And letting cash-poor pensioners pay the land value tax from their estates risks turning it into a disguised inheritance tax.

Will Britain get a land value tax?

This week Andy Burnham appeared to back away from a far milder form of tax reform that he espoused as recently as last week – a big rise in the personal allowance to take more low earners out of income tax. So it's highly unlikely he would have the political capital – or mandate – to push through such a radical move this side of a general election. But it may be an idea whose time has come. An early attempt at a land value tax in Britain – under Lloyd George's Liberals – collapsed under the weight of the administrative burden involved and trenchant opposition from landowners. But today's technologies mean the task is not insurmountable, given the political will. Versions of a land value tax have been introduced in jurisdictions including Australia, Canada, Denmark, Estonia, Singapore and Taiwan. “Burnham has been right about this for 16 years,” says Neidle in The Sunday Times. “The question is whether he's willing to be right today.”

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Inheritance tax planning is becoming increasingly important as pensions will fall into estates for inheritance tax (IHT) purposes from April 2027.

As the government looks to cut off a typical avenue for transferring wealth, an estate planning tactic could boost your loved one’s pension pot while reducing inheritance tax liabilities.

You could make use of several gifting allowances, but gifts of any size made to someone through “surplus income” are also exempt from IHT, even if you die within seven years of making them.

Sarah Coles, head of personal finance at investment platform AJ Bell, said: “If you’re taking an income from a pension, regular income payments, including those from annuities or drawdown arrangements, are generally considered income, so can be given away under this rule.”

This means you could withdraw money from your pension and regularly gift money to your child or another loved one to add into their pension.

The added bonus is that the person receiving the money can then claim pension tax relief when putting it into their pension pot.

You may have to pay income tax on the pension withdrawals, but it could save your loved ones from a larger inheritance tax bill, and possibly income tax, down the line, particularly when pensions fall into an estate for inheritance tax purposes from April 2027.

Financial adviser Lisa Conway-Hughes said this is a way of building a family inheritance tax plan and “moving the pension down the generations”.

What gifting out of ‘surplus income’ is – and how to get it right

You have to meet three conditions for a gift to be classed as having come out of surplus income:

• The gifts must be part of normal expenditure (you need to establish a clear, regular pattern of gifts)
• You have to be able to maintain a normal standard of living after making the gift (and avoid dipping into savings or investments to pay for it)
• The gift has to come from “normal” income. This includes pension, rental and dividend income.

Coles said you may not even need to have gifted regularly to qualify for the surplus income exemption.

She explained: “As long as your intention to give this money regularly is clear, and you’re giving it to the same people, for the same purpose, you don’t need to have established a long history of frequent, regular gifts.”

In any case, it’s worth keeping detailed records of any gifts you’ve made, including those out of surplus income, to make it easier for the executors of your will, also known as personal representatives, to administer your estate.

Coles said: “It’s useful to complete HMRC’s IHT403 form as you go, so your personal representative dealing with your estate has the information they need.”

When giving away money from your pension, bear in mind the gifts out of surplus income exemption will only apply to money from regular income, such as regular pension withdrawals.

Ian Dyall, head of estate planning at wealth manager Evelyn Partners, said: “The funds must come out of regular pension withdrawals – and not, for instance, from taking 25% tax-free cash as a lump sum.”

It may be worth speaking to a financial adviser about estate planning strategies.

They will be able to help you calculate what you can afford to give away without leaving you short in the future and whether the tax savings are worth it.

Coles warned: “You need to take care not to withdraw too much from your pension, too soon, in order to make gifts: there’s no point beating inheritance tax and then running out of money in retirement.”

How an annuity could lower your inheritance tax bill

Another way to lower the value of your estate from April 2027 is to buy an annuity with part of your pension and use it to fund a whole of life policy written in trust, which can cover the cost of the IHT bill upon your death.

Dyall, from Evelyn Partners, said: “The annuity payments are liable to income tax, but after age 75 income tax on the pension is pretty much inevitable, it’s just whether you pay it or the beneficiaries.

“The life assurance premiums are usually immediately exempt from IHT due to the normal expenditure exemption.

“The criticism of annuities is that if you die young the money is wasted, but here if you die young, although the annuity is in some sense ‘wasted’, the life assurance pays out after only a few premiums, so you effectively win either way.”

Andy Burnham, the UK’s new prime minister, is never going to be popular with everyone – but this may well be his hardest lesson.

It’s clear he wants to be a superhero prime minister – the hero of UK politics who speaks without a lectern (signifying no barriers) and someone who wants to give power to local authorities rather than just the Number 10 powerhouse. In his words, he “wants to bring back hope” as he attempts to fix the broken political system and the UK economy.

And as such, welfare appears to be at the core of what Burnham wants to achieve by putting an end to rough sleeping, introducing more council homes, and providing more help for young people to end the growing NEET (Not in Employment, Education or Training) crisis. In recognising the cost of living pressures, he pledged breathing space, which has included axing the 5% VAT from electricity bills from October and capping bus fares outside the capital at £2. He’s also announced a 20% cut in business rates for pubs, clubs and music venues from April, though not all hospitality venues are included.

But are his moves bold enough? Removing VAT on electricity bills is estimated to save families around £45 a year, but amounts to a 12p saving per day. The reality is most people will not feel the benefit, especially as average household energy bills are around £2,000 per year.

The bus fare cap is useful for regular bus users, saving around a third off single journeys for many. But households that rely on their own transport are still subject to high prices at the pumps – petrol prices have shot up from around 133p at the start of this year to 151p on average now, the RAC Foundation shows. In the meantime, there is uproar over the £26.2 billion in profits made by energy companies since the start of 2026, according to the End Fuel Poverty Coalition.

You’d be forgiven for calling these measures tokenism, and perhaps that’s all it really is as he figures out how to tackle the bigger problem of reducing government debt, improving the economy and making Britain a great place for investors once again.

But what can we expect to see, and can he, alongside his new chancellor John Healey, deliver on the big issues?

What can Burnham do to boost the UK economy?

Tackling labour productivity would be key. UK productivity has been at a low since 2008, but it is the foundation of economic growth and can improve living standards as it promotes stronger wage growth, too.

Hear more about the UK's growth problem as economist Julian Jessop talks to MoneyWeek’s Andrew Van Sickle about the UK's productivity problem in our latest podcast.

Related to productivity and growth is the burgeoning NEETs issue. We cannot afford to let the young generation become a lost generation. Financial advice and wealth management firm St James’s Place estimates that youth unemployment costs the government £125 billion. It is an area Burnham must absolutely focus on. Plus, let’s not forget, without young people in the work system, there is no one funding future state pension payments – today's workers pay for today's pensions.

Speaking of pensions, there are also heavy calls for Burnham to scrap the changes to salary sacrifice pension rules. As of next year, only the first £2,000 of salary sacrifice contributions per employee will be exempt from National Insurance contributions.

That, plus changes to inheritance tax (IHT) rules which will bring pensions into an estate for IHT purposes from April 6, 2027, do little to encourage pension saving.

Age UK claims 1.9 million pensions live in relative poverty and is estimated to cost the government around £10-£15 billion, according to Pensions UK. Simplifying pensions and encouraging savings will be vital, rather than adding barriers that undermine retirement savings.

Care should also be on his mind as an ageing population is also looming and quite possibly the next big crisis to face the UK.

Taxes

While Burnham has ruled against making any changes to the frozen tax allowance, which has stood at £12,570 since 2021, there are calls for the new chancellor to address this in the Autumn Budget.

A £500 increase in the personal allowance would cut income tax bills by £100 for basic rate taxpayers, and could cost the government £5 billion, AJ Bell estimates. Resoring it to £16,000, which is where it could be without the freeze, would cost the government around £35 billion, the investment platform says.

Could a cut to the National Insurance rate be a better alternative to take the pressure off household finances? Employees currently pay 8% in National Insurance on earnings between £12,570 and £50,270 (the rate is 6% for self-employed profits) and the rate is 2% above the upper earnings limit.

AJ Bell says that cutting each main rate by 1% would cost the government £5.8 billion, but would give workers more breathing space and it would certainly not be seen as just a token gesture; someone earning £35,000 a year could save around £225, compared with a £100 tax saving from a £500 increase in the personal allowance.

Backing British

Former chancellor Rachel Reeves was incredibly keen to get investors backing British companies, so much so, she reduced the cash ISA allowance to £12,000 for under 65s in a bid to shift savers into investing instead. This limit, taking effect in April 2027, will only apply to cash ISAs – and the overall £20,000 ISA allowance remains. Reeves even decided that cash holdings of any kind, such as money market funds, could not be part of a stocks and shares ISA. If any cash is parked in a stocks and shares ISA, interest earned will be taxed.

While in government in the past, the Conservatives proposed a British ISA, an idea that never truly came to fruition.

I don’t think either of these policies would encourage savers to suddenly invest more and in British companies specifically. So, what will Burnham do? Can he save the UK stock market?

I think policies that undermine saving, instead of encouraging it, are bound for failure.

Addressing speculation about hikes to capital gains tax is needed if he is to encourage investors, and if he can also restore political stability, there is a chance the UK stock market could thrive. But to do this, he will have to find a fine balance between public spending and fiscal policies.

Can he do it? It is early days as we wait to see his final 10 year plan. That and Healey’s Autumn Budget will be ones to watch closely as this could really be Labour’s final opportunity to show it can change fortunes, fix politics and bring back stability to the UK.

“I hate losing money more than anything. Losing money is what kills you. It is not the actual loss. It's the fact that it messes up your psychology,” Michael Platt of BlueCrest Capital Management observed in 2012.

So, just imagine how angry he is at losing a high-stakes £200 million battle with HMRC over the employment status of some of his traders, says The Times. The Supreme Court has thrown out BlueCrest's appeal, ruling that payments to some of BlueCrest's “partners” were effectively “disguised salary” and should be taxed accordingly.

Platt was so livid he launched a broadside, declaring that the UK is “no longer a serious contender as a place to do business” because of the taxman's propensity to shift guidance rules and move goalposts. It was a rare loss of composure in public from the publicity-shy financier from Preston, Lancashire, who has flown “under the radar” to build one of the world's leading hedge funds – now more properly described as his multi-billion-dollar private family office.

The ruling has implications for limited liability partnerships across the financial-services industry. Still, the consensus among City lawyers and industry peers is that BlueCrest had devised a “particularly aggressive” remuneration structure, says the Financial Times. That's no surprise given Platt's history of pushing the envelope in all matters financial.

But the judgment has brought “unwanted publicity” to a man who has spent “the best part of two decades cultivating a reputation as one of the industry's most private figures”, with only the occasional lapse. In 2019, he was filmed bragging about his wealth in the back of a New York taxi: “I'm the highest-earning person in the world of finance”.

What is Michael Platt's net worth?

Platt's success has certainly been extraordinary. Forbes puts his private worth at $20.9 billion, placing him among Britain's wealthiest, although he has long since decamped to more tax-friendly climes. In 2010, he moved the group's headquarters to Guernsey, days before the UK government's new top rate of income tax took effect.

“Platt's empire, built on mathematical precision and unrelenting secrecy, is a study in controlled opacity,” says The Capital Review in Singapore – one of several BlueCrest international outposts, including New York and Dubai. Platt himself stopped trading publicly after 2010, but has remained “deeply involved” in strategy, risk allocation and personnel decisions.

The firm's “signature” is his “obsession with data and asymmetry – the idea that small mispricings could yield outsized returns if traded with precision”. Former colleagues describe him as “analytical, detached and surgical – a man who reads numbers like prose”.

How Michael Platt built his fortune

In Platt's own account, it was his grandmother who set him on the road to hedge-fund wizardry. Born in 1968, his background was academic yet practical: his father was a lecturer in civil engineering, his mother worked in administration. But it was his grandmother who gave him shares as a teenager and taught him the basics of investing. After graduating, he joined JPMorgan where he became a managing director of proprietary trading, notes The Telegraph, before founding BlueCrest in 2000.

The early years were “explosive”, says The Capital Review. By the mid-2000s, BlueCrest was managing more than $10 billion and went on profitably to surf the volatility of the 2008-2009 financial crisis. The firm's success was partly down to Platt's trading acuity – he had a knack for “quantifying instincts” – and also sheer drive.

The upshot was a hard-charging culture where traders were ranked, rewarded and ruthlessly replaced; insiders called it a “meritocracy of terror”. How galling for a man who hates to lose, says the FT, that the “one opponent his firm has struggled to beat” is HMRC.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Over one million Brits are set to be additional rate taxpayers in the 2026/27 tax year, with record numbers paying above the basic rate of income tax according to the latest HMRC projections.

The number of people in the highest tax bracket is set to reach 1.3 million this year, double the number in 2021/22, as a record 3.2% of the population have an income of at least £125,140.

The number of additional rate taxpayers has ballooned by 33.8% since the 2023/24 tax year as tax thresholds have not increased in line with inflation.

Meanwhile, the number of higher rate (40%) taxpayers is also rising rapidly. An estimated 7.7 million Brits are set to pay tax at this rate in the 2026/27 tax year as they earn between £50,270 and £125,140 – up by 34% compared to figures from the 2023/24 tax year.

The overall number of people paying tax in the UK is up too. There are projected to be a total 40.8 million taxpayers across all bands in the 2026/27 tax year, up from 36.7 million in 2023/24.

Frozen thresholds are dragging more Brits into higher tax bands

The higher and additional rate tax bands are seeing fast increases as more people’s incomes rise above the thresholds.

But many of them are paying tax at higher rates than they would have in 2021/22 when adjusted for inflation.

This is a result of a process called ‘fiscal drag’, where tax thresholds are frozen by the government and not uprated with inflation. That means that when workers’ earnings rise (even just to keep up with inflation), they are ‘dragged’ into higher tax brackets.

Fiscal drag is often called a stealth tax because, while tax rates have technically not increased, more people start to pay income tax at higher rates despite their purchasing power not increasing significantly.

For example, the tax-free personal allowance has remained at £12,570 since 2021 and has not increased with inflation. If it had, then, using the Bank of England’s inflation calculator, it should have risen to around £16,013 by May 2026.

Thanks to frozen thresholds, workers are paying tax on their earnings between £12,570 and £16,013 when they wouldn’t be if thresholds had increased in line with inflation.

Laura Suter, director of personal finance at AJ Bell, said: “Frozen tax thresholds are affecting almost everyone who pays income tax, from pensioners to anyone earning more than the £12,570 personal allowance. But the biggest impact is felt by those pushed into a higher tax band.

“Once your income exceeds £50,270, every additional pound you earn is taxed at 40%, rather than the 20% basic rate. That means a much larger slice of any pay rise goes to the taxman, leaving you with far less extra money in your monthly payslip.

How to lower your tax bill

Fiscal drag can be damaging to your personal finances as it means you are keeping less of your earnings than you otherwise would have if thresholds had increased with inflation.

It can be particularly difficult for people whose earnings sit on the edge between tax bands. For example, someone who earns £50,000 will today pay the basic 20% rate of income tax. However, if their earnings increase by just 2% (£1,000), £730 of this will be dragged into the higher 40% tax band.

In this situation, the only way you can lower your tax bill is to reduce your taxable income. That does not mean saying no to a pay rise – it means using the extra cash in a more tax-efficient way.

The simplest way of doing this is to put more money into your pension through salary sacrifice as this is deducted from your pre-tax income.

If you earned £51,000, you would need to pay 40% income tax on the £730 of your income that sits in the higher rate tax bracket. However, if you put this into your pension through salary sacrifice instead you would be taxed 0% on that £730.

There are other salary sacrifice schemes in the workplace too where you can pay for certain things out of your pre-tax income. The most common of these is the ‘cycle to work’ scheme where you can pay for a bike with tax relief, but schemes exist to pay for electric cars and other goods and services.

The number of investigations into capital gains tax (CGT) rose by 26% last year, netting HMRC £266 million from Brits who had underpaid.

The taxman closed 9,800 investigations in 2024/25, up from 7,800 the previous financial year, according to new Freedom of Information (FOI) figures – the highest number of investigations in a tax year since the Covid pandemic.

Of those whose claims were probed, the average amount of underpaid tax rose from £23,333 to £27,142.

The total tax taken by HMRC following investigations increased by 46% year-on-year, from £182 million in 2023/24, the FOI figures obtained by tax and accountancy firm Lubbock Fine revealed.

Rachael Griffin, tax and financial planning expert at wealth manager Quilter, said the figures suggested “investors, landlords and business owners should not assume capital gains tax reporting slips under the radar”.

Griffin added: “At the same time, HMRC has significantly improved its ability to identify discrepancies through increased data sharing and digital reporting.

“Investment platforms, estate agents, conveyancers and other financial institutions provide information that can be cross-checked against tax returns, making it increasingly difficult for gains to go unreported.”

An HMRC spokesperson said: “We’re committed to helping people pay the right amount of tax, and the vast majority do. We take a variety of approaches to ensure all taxpayers are aware of their obligations and pay what they owe at the right time.”

Why people are being investigated over their capital gains

The uptick in CGT investigations comes after the annual exempt amount was reduced from £6,000 to £3,000 in April 2024. It was reduced from £12,300 to £6,000 in April 2023.

Griffin said: “Far more people now have a potential reporting obligation, including those who may never previously have had to think about CGT. As a result, some individuals may be finding themselves caught out simply because they are unaware of the rules.”

Lubbock Fine said HMRC was also cracking down on cryptocurrency investors, some of whom might not be aware crypto assets are taxable.

Graham Caddock, director at Lubbock Fine, said: “Cryptocurrencies were renowned for being the ‘wild west’ of investing. For many crypto investors this categorisation has stuck and many underestimate how seriously HMRC treats undeclared gains.

“Even worse, some crypto investors think that gains made through digital assets somehow sit outside the normal tax rules, which is exactly why HMRC is targeting the sector so aggressively.”

Lubbock said a lot of retail investors and young day traders were unaware selling shares could trigger a CGT bill as well.

How to avoid being investigated over your capital gains

First, it’s worth making sure you report any gains correctly.

Caddock, from Lubbock Fine, said: “Many CGT enquiries start because of basic errors such as failing to get an independent valuation (perhaps more than one) for such things as gifts of family company shares or even property.”

If you have had to input estimates in the value of assets when you report your capital gains, it’s worth explaining why too.

“This may avoid an enquiry altogether, and the disclosure will help limit HMRC’s ability to enquire into earlier tax periods,” Caddock explained.

Charlene Young, senior pensions and savings expert at investment platform AJ Bell, said lots of people come unstuck when it comes to reporting gains on property.

Young said: “While gains made on your main residence are usually exempt from CGT, profits on second homes must be declared and the estimated tax paid within 60 days of completion to avoid penalties and further investigation.

“HMRC can use data from the Land Registry, banks and estate agents to cross-reference what it has been told by taxpayers, or what it suspects hasn’t been declared.”

It’s also worth making full use of your annual £20,000 ISA allowance where possible. Gains made from investments held in a stocks and shares ISA are shielded from CGT.

Rumours are already swirling about what changes Andy Burnham could make if he were to win the Labour leadership contest – including a shake-up of the capital gains tax regime.

The MP for Makerfield looks more-than-likely to gain the keys to Number 10 later this month and is said to be considering Wes Streeting as his chancellor.

Should Streeting take on the role, he could look at reforming capital gains tax (CGT) in attempts to drum up much-needed cash for the Treasury.

In an interview with the BBC’s Nick Robinson in May, the former health secretary suggested raising the three CGT rates to mirror income tax rates – 20%, 40% and 45%.

Currently, you pay a rate of 18% if you’re a basic-rate taxpayer and 24% if you are a higher or additional-rate taxpayer.

A number of experts have called for the equalisation of CGT rates with income tax rates, including the Centre for the Analysis of Taxation and Dan Neidle, founder of tax think tank Tax Policy Associates, arguing it would reduce tax avoidance and boost UK economic growth.

Neidle posted on X that Streeting’s proposal was “good”, suggesting the extra money it brought in could be used to cut the basic rate of income tax.

“That would be a brave thing for a Labour politician to do, but in my opinion the right thing at this moment. Spend the rest on e.g. defence. I think most people would agree,” Neidle said.

However, Jeremy Hunt, former chancellor for the Conservative Party, said a CGT rate rise would be “terrible” for the economy.

He said: “It doesn't matter if you're left or right, don't do it. If you increase your CGT above 24%, you will get less revenue, not more, because investors will change their behaviour.”

MoneyWeek asked Andy Burnham’s office for comment.

How would a rise in capital gains tax rates affect you?

Calculations by wealth manager Rathbones suggest aligning CGT rates with income tax rates could increase the tax bill on a £50,000 gain by almost £10,000 for an additional-rate taxpayer.

A higher-rate taxpayer’s bill would rise by over £7,500, according to Rathbones. The tax bill on a £10,000 gain would be more than £1,000 higher.

Basic-rate taxpayers would be stung less – Rathbone’s calculations suggest the tax bill on a £10,000 gain would be over £100 more compared to the current rates.

These figures were calculated based on gains being made outside tax wrappers such as ISAs and pensions and including the £3,000 CGT annual exempt amount.

How to protect against capital gains tax

Everyone gets a CGT annual allowance of £3,000. Any gains made within each tax year less than this amount aren’t taxed, and there are other methods you can use to lower your CGT bill too.

Maximise the use of ISAs

Gains made inside tax wrappers like ISAs are free from CGT so it’s worth utilising your full ISA allowance each year. The current annual ISA allowance is £20,000 per tax year.

Assets like shares or funds held outside an ISA can be transferred into a tax-wrapped ISA through a ‘Bed and ISA’.

Jason Hollands, managing director at wealth manager Evelyn Partners, said: “This involves selling investments, ideally not exceeding the annual £3,000 CGT exemption, and then repurchasing them within an ISA so that future gains – and income – are sheltered from tax.”

Use interspousal transfers

Assets can typically be transferred between married couples and civil partners without triggering a tax bill.

Transfers can be a useful way of moving your assets around and using up each person’s CGT and ISA allowances to full effect.

It can also be worth transferring assets to a partner who pays a lower rate of CGT, thereby reducing your combined tax bill.

Use your annual allowance rather than letting gains build

By selling assets each year within your annual £3,000 allowance, you can pull out profits tax-free and save yourself a larger bill on a big chunk of gains down the line.

Holland said: “The annual CGT exemption has become much smaller at £3,000 than it used to be, but it is still valuable. Many investors overlook it, allowing unrealised gains to build up over many years.”

Tens of thousands more households could be dragged into paying the ‘mansion tax’ under rumoured plans, if Burnham becomes the new Labour leader.

The prime minister-in-waiting could potentially lower the threshold at which people start to pay the High Value Council Tax Surcharge from £2 million to £1.5 million, according to reports in The Mail on Sunday.

An estimated 150,000 additional households could be pulled into paying the surcharge if the levy was brought down to the reduced amount, based on calculations done by think tank Tax Policy Associates.

The so-called mansion tax was first announced by chancellor Rachel Reeves during her 2025 Autumn Budget and is set to come into force in April 2028.

As it stands, the measure will see those with properties worth over £2 million pay between £2,500 and £7,500 per year depending on the value of their home. It is expected to bring in £430 million in 2029/30.

But should Burnham win a Labour leadership contest, he will need to find ways to fund an ever-growing welfare budget and multi-billion pound hole in the Defence Investment Plan (DIP).

Lowering the entry level at which households pay the mansion tax could be one way of doing this alongside potentially scrapping the triple lock pension system.

MoneyWeek approached Andy Burnham’s office to comment.

What is the mansion tax and how will it work?

The High Value Council Tax Surcharge will take effect from April 2028 and apply to homes in England worth £2 million or more.

The Valuation Office (VO), which is part of HMRC, is set to carry out a valuing exercise to assess which homes the surcharge will apply to.

Homes valued at £2 million or more but less than £2.5 million will be charged £2,500.

Properties worth £2.5 million or more, but less than £3.5 million will need to pay £3,500. Homes worth between £3.5 million and £5 million will need to pay £5,000. Properties worth £5 million or more face a £7,500 surcharge.

These charges are set to be increased each year in line with the Consumer Price Index (CPI) measure of inflation. Revaluations will be conducted by the VO every five years.

How a reduced threshold of £1.5 million on the levy would be applied exactly is unclear, but would almost double the amount of households paying it, according to calculations done by Tax Policy Associates.

The think tank predicts around 243,000 households would have to pay at least something, up from 127,000 under a £2 million entry-level threshold.

What else is Andy Burnham considering?

In a major speech on 29 June, Burnham said he intended to reform business rates to support high streets and pubs which have taken a battering in recent years.

According to the British Beer and Pub Association, a trade body for the sector, 161 pubs closed across Britain in just the first three months of 2026. UK Hospitality, a trade body for the hospitality sector, has forecast six hospitality venues will close each day in 2026.

Rumours have been swirling about what else Burnham could introduce if he were to become the next prime minister of the UK.

The MP for Makerfield could reportedly look at reforming Capital Gains Tax (CGT) by bringing the rate paid in line with income tax. Basic-rate taxpayers currently pay a CGT rate of 18% while higher and additional-rate taxpayers pay 24%.

Burnham could also replace stamp duty with a ‘land value tax’ – an annual tax based solely on the value of the land itself.

Marriage rates among the over 50s have risen significantly in recent years, according to the Office for National Statistics (ONS). Latest data reveals the number of men who said ‘I do’ aged 50+ is up by 33% in the past decade; for women in that age group it’s even higher, at 47%.

Those figures are greater still for people in their 60s, where there’s been a 33% increase in men who have married aged 60+ and a 56% rise among women over the 10 years to 2022.

Later-life marriages – whether people’s first, second or subsequent – often come with children on at least one side. Estimates vary but based on ONS figures, somewhere between 10% and 33% of families in the UK are blended, which the ONS defines as at least one child having a parental relationship with both members of the couple and another child being a stepchild.

Blended families can bring complications, whether around presents or planning holidays. But what happens when the stakes are higher?

If you’re widowed or divorced and have found love again, the last thing you might want is to start thinking about the end. Yet imminent inheritance tax (IHT) rule changes mean more families may need to do exactly that.

As announced in the 2024 Budget, from April 2027, defined contribution (DC) pensions will be treated as part of an estate for IHT purposes. The change is expected to double the number of estates liable for IHT to around 8%.

For people with children from a previous marriage, it’s a reminder of the importance of planning ahead. A common piece of advice is to think about what you want to happen after you die as early as possible. When everyone’s healthy and getting along, emotions are steadier and discussions tend to be easier. Once circumstances change, those conversations can become more difficult.

What myths and misconceptions do people have about estate planning?

Many people still assume estate planning is only relevant to the very wealthy. Yet rising house prices, combined with the nil-rate band (NRB) being frozen at £325,000 since 2009, have brought more families into scope for inheritance tax.

Other common misconceptions include believing a spouse automatically inherits everything if someone dies intestate (without a will), that pension benefits automatically fall to family members, or that unmarried couples have the same legal protections as married couples.

Add in the complexities of blended families, differing financial needs and the pension changes and the value of clearly documenting your wishes is emphasised.

How do trusts fit into estate planning?

Trusts are often used to provide control over how assets are passed on.

Every trust has three key parties: a settlor, who provides the assets; the trustee, who manages them; and the beneficiaries, who ultimately benefit from them.

Assets that can be placed into trust include cash, property, investments and land.

In the UK, there are several different trust structures available.

Lifetime trusts take effect immediately and include arrangements such as bare trusts, vulnerable person’s trusts and personal injury trusts.

Will trusts are created through a will and only take effect on death. Examples include discretionary will trusts or pilot trusts, which can hold assets such as pension death benefits or life insurance payouts.

Interest in possession trusts, often known as life interest trusts, allow a surviving spouse to benefit from an asset during their lifetime without owning it outright. For example, they might have the right to live in a property or receive investment income, while the underlying capital eventually passes to your children or other beneficiaries.

Discretionary trusts offer trustees broad control over how and when assets are distributed. Provided the settlor lives for seven years after making the transfer, assets can fall outside their estate for IHT purposes, although periodic trust charges (typically every 10 years) may still apply.

Who to name as a beneficiary

Andrew Zanelli, head of technical engagement at investment platform Aberdeen Adviser warns of a potential “nomination minefield” once pensions become subject to IHT.

For blended families, the key question may be whether pension assets should pass to a surviving spouse or directly to children from a previous relationship.

You can see the attraction of leaving everything to a husband or wife. Pension wealth passing directly to a surviving spouse or civil partner benefits from the ‘interspousal exemption’ and is not subject to IHT on first death.

That exemption doesn’t just apply to the NRB but an additional residential nil rate band (RNRB), which is currently £175,000. This means a husband or wife could potentially pass on up to £1 million with no IHT consideration.

The challenge is what happens later.

The hope is that if everything passes to the spouse on first death, when they die, they would direct everything as intended – such as to the first spouse’s children or other named beneficiaries. But circumstances can change.

Zanelli shares an example: “The main issue here is the potential for the children of the first to die to be disinherited. Let’s assume the husband dies first. By nominating his wife, he is effectively handing over future control of his pension pot to her. She could change her nominations at any time in favour of other individuals, cutting out his own children. This could be motivated by remarrying someone else, or falling out with his children.”

Leaving assets directly to children presents a different problem. Any amount above available allowances may attract IHT immediately, plus the surviving spouse may have no access to those funds if they need them.

If you’re trying to look after your surviving spouse but want to commit something for your children, Zanelli says you can gain peace of mind by setting up a structure where your spouse is looked after for life – even through they don’t own the asset – and ultimately your children will be the recipients of any capital that's left.

These trust structures could take several forms, including a discretionary will trust, life interest or spousal bypass trust.

What are bypass trusts?

Historically, spousal bypass trusts have been used to balance support for a surviving spouse and protecting assets for children from previous relationships.

Whether they remain popular beyond April remains up for debate.

Dan Blandford, chartered financial planner at The Private Office (TPO), believes two broad approaches may emerge.

The first is that people may stop using bypass trusts altogether and instead leave assets directly to a spouse, taking advantage of the IHT exemption and trusting them to pass wealth to the intended beneficiaries later.

This may prove attractive for families looking to avoid an immediate IHT charge, although it relies heavily on the surviving spouse ultimately carrying out those wishes.

The second scenario he foresees is more likely among wealthier families with very large pensions expected to support several generations.

Rather than allowing pension wealth to pass down through successive estates and potentially attract IHT multiple times, some may choose to pay the tax once and move assets into a discretionary trust structure.

“I envisage that would be the second reason it will be used; do people accept a ‘one-off’ IHT charge in exchange for avoiding repeated charges as wealth passes from one generation to the next,” says Blandford.

But he believes spousal bypass trusts will still have an important role for those motivated primarily by control rather than tax savings.

For those conscious of inheritance tax and retaining oversight of family wealth, these trusts allow them to determine when assets or income are distributed and help protect beneficiaries from risks such as divorce or financial difficulties.

At the same time, he expects more people to draw pension assets during their lifetime, reducing the size of the pension pot potentially exposed to IHT.

The importance of reviewing a will

Estate planning concerns are not unique to pensions.

Tamsin Caine, director of financial planning at Smart Financial, points to the example of a life interest trust involving the family home. A surviving spouse may retain the right to live in the property for life, while the deceased’s spouse’s share ultimately passes to their children.

To achieve this, the property generally needs to be owned as tenants in common. Otherwise, ownership passes automatically to the surviving spouse, bypassing the will altogether.

Caine says careful drafting and regular reviews are essential.

“It’s important to revisit wills and keep them up to date, making sure they’re still in line with wishes, with legislation and that they still reflect everything that you’d want.”

She also cautions against viewing pensions primarily as an IHT planning tool.

“Pensions are intended to provide income in retirement. While we know people have used them for planning for the next generation, if you’re thinking about passing down the generations – in my view, pensions should be the last thing you touch,” she says.

For all these scenarios legal advice is highly recommended – ideally sitting alongside financial advice if that’s possible.

Paul Gotch is senior partner at Private Client Solicitors. He says by nature a pension will be held in trust, subject to scheme rules, depending on the individual policy. All anyone really has the power to do is change their expression of wish, or nomination form, which tells the trustee who should receive it on their death. The trustee should take that guidance but they’re not legally binding.

Think about how you’re splitting things. Does the spouse get the pension and any children get other assets? Are you splitting things 50/50? Have you got other children with the new spouse?

“You need to balance the legal perspective – what you can do, with the financial perspective – what is fair. Are you leaving your spouse sufficient funds to maintain their standard of living, the cost of the property and so on,” says Gotch.

“Equally, if assets go to that surviving spouse, there's a risk that on his or her death, they update the will and nomination to only include his or her own children, which then creates the disinheritance of the first.”

Think about care costs as well. It’s very common when a relationship is going well and is full of trust, that the surviving spouse will ‘do the right thing’ but circumstances change.

What if they’ve not fallen out with your children but they needed several years of expensive care, asks Gotch. They planned to pass on the remaining assets as their spouse intended but by the time they die, these might have been significantly depleted.

Ultimately, there isn’t a trust structure that can eliminate every risk. Family circumstances evolve, relationships change and intentions can be misunderstood. But for blended families facing a more complex IHT landscape, taking time to put clear plans in place may help prevent disputes and uncertainty later on.

Grieving families now face paying out more money to help resolve a loved one’s estate after the cost of applying for probate rose by 75% this month.

The Grant of Probate fee - giving someone a legal right to deal with the assets of a person who has passed away - increased on 13 July from £300 to £526.

It has almost doubled since May 2024, when it was £273.

Martyn James, consumer expert, said the hike would leave people “absolutely justified in feeling upset and ripped off”.

He added: “Probate is one of the most antiquated, bureaucratic and complex processes we will encounter – precisely at the point where we need simple and clear help the most.”

A Ministry of Justice spokesperson said the cost helps improve its service.

The spokesperson said:  “We know that losing a loved one is already a difficult time. That’s why it’s vital the probate service remains as smooth, swift and simple as possible. 

“The new fee reflects the full cost of an ever-improving service which enables families to resolve disputes in as little as two weeks. Increasing fees is always a last resort, however the new cost accounts for rising inflation as well as investment in delivering an efficient and modern service.

“The worst off will face no fees whatsoever and anyone struggling can still apply to have the fee reduced or removed entirely through our Help with Fees scheme.”

While the application fee has increased, the charge for copies of the probate documents – when requested alongside the application – has been cut from £16 to £2.

What is probate?

Probate is the legal right granted to someone to deal with and distribute another person’s estate (property, possessions and money) when they die.

You can only apply for probate if you’re the executor of a will or the closest living relative of someone that has died who didn’t have a will in place.

Typically, the next of kin or executors of a will have to apply for probate before they can claim, transfer or distribute a deceased person’s assets.

You don’t always need to apply for probate. You may not need it if the person who died only had savings in their estate. You may also not need probate if they owned shares or money with others, in which case the shares and money go to the surviving owner.

You also don’t need to apply for probate if the deceased person owned land or property as a joint tenant. In this instance, the land or property is automatically passed to the other tenant.

Financial institutions, such as banks and mortgage lenders, have different rules on whether you can access a deceased person’s assets without having been granted probate, so it’s worth contacting them to find out what you need to do.

How do you apply for probate?

You can apply for probate by post or online via gov.uk, which is usually quicker.

If you’re applying by post, the form you need to fill in is different depending on whether the person left a will or not.

If they did, you need to fill in the application form PA1P. If they didn’t have a will, you need to fill in the PA1A form.

The government says the probate is typically granted within 12 weeks of submitting an application.

It’s crucial you do a few things before applying for probate though.

This includes working out an estimate of the value of the dead person’s estate for inheritance tax (IHT) purposes.

Even if no IHT is due, you’ll need the value as part of your probate application.

If IHT is due on the estate, you have to report its value to HMRC within one year via an IHT400 form. You can’t apply for probate until this is done and normally need to start paying any IHT due before you can get probate granted.

If IHT is owed on an estate, you also need to send “full details” of the estate to HMRC within 12 months of the person dying and before applying for probate.

Full details refers to the estate’s assets and debts, any gifts made, and any reliefs and exemptions.

Even if no IHT is owed, you may still need to send full details of an estate to HMRC.

For example, if the person who died gave away over £250,000 in the seven years before they died or if their estate is worth more than £3 million, you will need to contact HMRC.

There is a whole list of reasons on the gov.uk website of why you may still need to send full details of an estate to HMRC despite no IHT being owed.

You don’t have to give full details of an estate’s value to HMRC if all of the following applies:

• The estate counts as an “excepted estate”,
• There’s no IHT to pay, and
• There are no reasons, as per gov.uk, the full details of an estate still need to be sent to HMRC, despite IHT not being due.

An estate is typically classed as excepted if its value is below the nil-rate band (£325,000) or it’s worth £650,000 and any unused nil-rate band was transferred to a surviving spouse or civil partner.

An estate is also classed as excepted if the person who died left everything to a spouse living in the UK or a qualifying charity and the estate is worth less than £3 million.

The last way an estate can be excepted is when the deceased person was living permanently outside the UK when they died and the value of their UK assets is £150,000 or less.

How to help your loved ones with the probate process

You can’t do much about the cost of applying for probate, but Sarah Coles, head of personal finance for AJ Bell, suggests people can ensure their own affairs are in order so it is easier for their loved ones to manage their estate.

This includes making sure your wishes are clear by making a will, make a list of your financial arrangements including bank accounts and pensions and ensure any paperwork for taxes or unpaid debts can be found.

Coles says: “Having to pay a fee for probate is bad enough, given it creates an endless pile of admin for those you leave behind, so a 75% hike in the fee is adding insult to injury.

“For those who can’t afford it, there’s a Help with Fees remissions scheme, to cover the cost.

“For everyone else, this is one more horrible hoop to jump through that makes the paperwork and processes after death such a nightmare. It means we could all benefit from taking steps to make the process easier for our loved ones after our death.”

The Caprons, Lewes, East Sussex

This Grade II-listed Georgian house in the centre of Lewes was once home to historian Asa Briggs, who was also a Bletchley Park code breaker. The garden includes a Grade-II listed, octagonal summer house. 5 bedrooms, 4 bathrooms, 3 reception rooms, kitchen, cellars, roof terrace, walled garden.

Price: £2.1m Jackson-Stops 01444-484400

Broomshields Hall, Satley, Bishop Auckland, County Durham

A Grade II-listed Georgian house with gardens that include a one-bedroom cottage, two summer houses and a lake. The house has a carved oak staircase and a large kitchen with an Aga. 4 bedrooms, 4 bathrooms, 3 reception rooms, library, 18 acres.

Price: £1.75m Finest Properties 0330-111 2266

The Manor House, Great Harrowden, Northamptonshire

A Grade II-listed manor house in a popular village, set in south-facing gardens with a kitchen garden with a greenhouse and a circular summer house with sofas and a fridge for wine. The house has beamed ceilings, panelled walls and period fireplaces. 6 bedrooms, 4 bathrooms, 3 reception rooms, breakfast kitchen, attic, pond, 0.8 acres.

Price: £1.15m Fine & Country 01604-309030

The Court, Axbridge, Somerset

A Grade II-listed Georgian house in Axbridge with views towards Glastonbury Tor. The house is set in gardens that include a summer house and an area dedicated to archery. It has flagstone and oak floors, period fireplaces and an indoor swimming pool with a gym. 7 bedrooms, 5 bathrooms, 3 reception rooms, breakfast kitchen, garden room, cinema, courtyard, parking, walled gardens, kitchen garden, 1.15 acres.

Price: £2.395m House & Heritage 01257-441990

Orchard Cottage, Wood End, Ardeley, Hertfordshire

A Grade II-listed, 17th-century house comprising three original cottages, with a summer house with a wood-burning stove and Wi-Fi. The house has exposed wall and ceiling timbers and inglenook fireplaces. 4 bedrooms, 2 bathrooms, reception room, gardens, 0.75 acres.

Price: £1.15m Fine & Country 01920-443898

Polwarth Terrace, Merchiston, Edinburgh

A duplex apartment on the first floor of a period property in the sought-after area of Merchiston. The flat retains its period fireplaces and has a dining room with French doors opening onto a balcony and a spiral staircase leading to a garden with a summer house. 6 bedrooms, 3 bathrooms, reception room, office/bedroom 7, dining kitchen, garage, summer house, parking.

Price: £985,000+ Savills 0131-247 3770

Moreves Manor, Great Waldingfield, Sudbury, Suffolk

A Grade II-listed, 17th-century house set in large gardens that include a wildlife pond and a summer house complete with a shower, sauna and wood-burning stove. The house has exposed wall and ceiling timbers and a breakfast kitchen with an Aga. 6 bedrooms, 2 bathrooms, 2 reception rooms, office, garden room, outdoor swimming pool, 1.58 acres.

Price: £950,000+ Strutt & Parker 01473-220444

Heamoor, Penzance, Cornwall

A renovated, Grade II-listed Cornish long house set in landscaped gardens with a tree house, an orangery overlooking the kitchen garden and a summer house that is used as a pottery studio. The house has Georgian sash windows, open fireplaces and a newly fitted kitchen with French doors leading onto the gardens. 4 bedrooms, 4 bathrooms, 3 reception rooms, study, utility with en-suite shower, workshop, paddock, stable block, 2.5acres.

Price: £1.2m Savills 01872-243 200

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

HMRC is increasingly hitting bereaved families with penalties for filing inheritance tax returns late as they struggle with long, complicated forms, according to data from a Freedom of Information request.

The number of penalties issued by HMRC for filing inheritance tax (IHT) returns late increased 35% from 3,850 to 5,200 over the last five years, data up to the tax year 2024/25 obtained by TWM Solicitors showed.

Fines for late filing rapidly increase over time, from an initial £100 to up to £3,000 after 12 months.

Many families with modest estates have been drawn into paying IHT in recent years, largely because the IHT threshold has remained frozen since 2009. Even an average house can now trigger an IHT bill on its own.

But Duncan Mitchell-Innes, partner and deputy head of private client at TWM, said the increase in late penalties is also being driven by more families attempting to complete IHT returns themselves, without realising the complexity involved.

“People often underestimate the complexity of the UK’s IHT rules. What seems like a straightforward task can quickly become time-consuming and technically challenging, particularly when HMRC requires extensive supporting evidence. This can lead to penalties if deadlines are missed,” he said.

Complex IHT forms

The basic IHT400 form alone has 122 questions, often requiring detailed financial and historical information.

This is the main form families will need to fill in for inheritance tax purposes. But in many cases, it must be supplemented by additional schedules – requests for information – of which there are more than 30, depending on the nature of the estate.

One of the most time-consuming parts of an IHT return, according to lawyers, relates to the valuation of assets. Many assets, such as residential property, need to be valued professionally – market estimates are not enough.

In addition, some assets, such as shares, have specific ways of being valued for IHT purposes. Getting these valuations completed on the correct technical bases can be time consuming without prior technical knowledge.

Delays can also arise where executors struggle to identify all the relevant details needed for the IHT400. This can include tracing all bank accounts, investments and historical gifts, which sometimes go back many years – for instance due to the seven year rule. Many banks only provide this information by post.

Missing out on inheritance tax reliefs

Mitchell-Innes said it can be hard for people handling their loved one’s IHT return on their own to identify all the relevant technical reliefs and exemptions that may apply, together with gathering the evidence to support them.

For example, gifts made out of surplus income or more than seven years before death may be exempt, but finding evidence to support that exemption can take time.

Some families handling their own return even lose out on reliefs and exemptions available to them simply because they do not know they exist.

“Reliefs aren’t applied automatically. People must actively claim reliefs and exemptions and find the evidence to support them where needed, which can be time-consuming. Without proper advice, families risk penalties and leaving valuable reliefs unclaimed,” said Mitchell-Innes.

The number of penalties for late filing of inheritance tax returns is likely to increase further after unused pension pots are brought into the IHT net from April 2027, leading to more families having to submit a return.

The development is expected to increase the demands on personal representatives – those in charge of administering the estate left behind after a death – to get the pension IHT paperwork right, or face potential fines themselves.

The latest government data on business rate appeals contains good news and bad news. On the downside, there has been a surge in the number of businesses launching cases: almost 130,000 business owners began the process during the first three months of the year, five times more than in the fourth quarter of 2025; that will probably lead to delays in processing claims. More positively, the data also shows that 57% of firms challenging their business rates bills eventually secured a reduction; in other words, your chances of winning are pretty good.

The statistics, published by the Valuation Office Agency (VOA) at the end of May, underline the importance of checking your business rates assessment quickly. New assessments of the rateable value of more than two million business properties in England and Wales came into force on 1 April; this rateable value, based on the VOA's estimate of the commercial rent potentially chargeable on each property, is what determines your business rates bill.

It's now too late to appeal business rates set following the previous VOA revaluation, which took place in 2023; the deadline was 31 March, which is part of the reason for the spike in claims in the first quarter. But you can challenge the rateable value that came into force in April. If you can show the VOA is overestimating how much rent your business property could secure – either what you are paying to rent it, or if you own the property how much you could rent it out for – you could get a reduction.

Check, challenge and appeal your business rates

Such cases involve three stages. Step one is known as a “Check”. Effectively, you're just asking the VOA to confirm the factual details it holds about your property, so you can check you're not being overcharged because of inaccurate data. Relatively few Checks result in a reduction, so most businesses then move on to stage two, known as “Challenge”.

Following a Check, you have four months to submit a Challenge. This is your opportunity to present evidence suggesting your rateable value has been wrongly estimated. That could include, for example, details of the open-market rent agreed on the property, or details of other leases on similar properties nearby. Alternatively, there may have been a material change to your property – you're using it for a different purpose, say, or there have been developments in the area that could affect its value.

Cases that don't succeed at the Challenge stage can be appealed at the independent Valuation Tribunal Service. There's a fee of up to £300 to launch an Appeal – stage three of the process – and you must file your claim within four months of receiving the Challenge decision. You'll get your fee back if you win.

In theory, you can handle each stage of a business rates case yourself, but many businesses appoint a professional agent to manage the process on your behalf – particularly if they proceed to Appeal. Agents can give you advice on whether it's worth bringing your case and handle the work for you, using their experience to maximise your chances of success.

Make sure you appoint a reputable agent. The Royal Institution of Chartered Surveyors can provide details of firms that abide by their professional standards and code of best practice.

Finally, it's important to note these processes can result in your business rates bill rising rather than falling. This is relatively unusual, but certainly not unheard of. Make sure you're not presenting evidence that gives the VOA reason to think it has underestimated your rateable value.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

You pay capital gains tax when you make a capital gain over a certain allowance. However, these allowances have changed in the last few years, meaning more people are being brought into the net.

That makes it all the more important to know how the tax works, and when you need to pay it. Test your knowledge in our quiz below.

How well did you do in our capital gains tax quiz? Share your results on social media.

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• 10 ways to cut your capital gains tax bill
• Crypto investors sent 100,000 capital gains tax warning letters – do you need to pay tax?
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The government is considering plans to hit non-UK resident property owners with an extra "mansion tax" charge in a bid to raise more cash.

A consultation launched by HM Treasury explores the possibility of applying a “non-resident premium” on top of the High Value Council Tax Surcharge (HVCTS), also known as the “mansion tax”.

The consultation says: “In high‑pressure housing markets, particularly in areas such as London, there is interest in understanding whether demand from non‑UK resident owners may be contributing to pressures on housing availability and prices.”

The extra non-resident surcharge is just being considered and will not necessarily come into effect. The government’s consultation closes on 14 July.

An HM Treasury spokesperson said: “The government is inviting views on whether there could be a case for a non-resident premium, as part of a wider consultation which seeks to address a longstanding council tax unfairness in this country.

“We welcome views from all interested parties, including on whether demand from non-resident owners may be contributing to housing pressures.”

What is the mansion tax and how would a non-resident premium be applied?

The HVCTS will take effect from April 2028 and apply to homes in England worth £2 million or more. The charge will be owed once per tax year.

The chancellor has claimed the surcharge will make the council tax system fairer.

The Valuation Office (VO), which is part of HMRC, is set to carry out a valuing exercise to assess which homes the surcharge will apply to.

Homes valued at £2 million or more but less than £2.5 million will be charged £2,500.

Properties worth £2.5 million or more, but less than £3.5 million will need to pay £3,500. Homes worth between £3.5 million and £5 million will need to pay £5,000. Properties worth £5 million or more face a £7,500 surcharge.

These charges are set to be increased each year in line with the Consumer Price Index (CPI) measure of inflation. Revaluations will be conducted by the VO every five years.

When it comes to the non-resident premium, there is no further detail in the government’s consultation on how the extra levy would be applied if it did come into force.

What could the effect of the premium be?

Marc Acheson, global wealth specialist at pensions and life insurance firm Utmost, said: “This latest proposal is likely to raise far less revenue than envisaged as more people will consider selling London properties, putting further downward pressure on valuations at the top end of the housing market.

“More broadly, it risks further damaging the UK’s reputation as a destination for wealth and accelerating the ongoing exodus of wealthy international individuals that began in earnest following the abolition of the non-dom regime at the Autumn 2024 Budget.

“The economy cannot afford to lose these individuals, who are the largest contributors to the tax base, and once this cohort leaves it is very hard to replace them.”

Sian Armitage, tax director at tax advisor Mark Davies and Associates, said the premium could push non-resident property owners weighing up a sale into putting their property on the market.

“For those that are undecided, they may treat this as yet another reason to sell, or consider this as an indication of things to come,” Armitage said.

However, Armitage added that because the levy would be applied to non-residents “it does imply that those individuals are not spending significant time in the UK in any case, so I don’t envisage this policy alone as having a negative impact”.

Meanwhile, Peter Ferrigno, director of tax services at consultancy Henley and Partners, said making the HVCTS slightly higher for non-UK residents would be an “inconvenience”, but it was unlikely the introduction of such a premium on its own would be enough to make wealthy individuals sell up.

But, he said the bigger issue is they could leave when also considering “many other changes, and an indication that there will still be more demands for a bit here, a bit there, a bit more after that, and then...who knows what's next”.

What is a non-UK resident?

Non-UK residents pay tax on their UK income, but not on their foreign income. In contrast, a UK resident would typically pay UK tax on income from both sources.

You are generally classed as a non-UK resident if you spend fewer than 16 days in the UK each tax year or work abroad full-time and spend fewer than 91 days in the UK each tax year and no more than 30 of those days are spent working.

The statutory residence test (SRT) determines whether you are resident in the UK under UK domestic tax law for tax years 2013/14 onwards. You can find out more on gov.uk.

Almost three million people could cut back on pension saving as a result of the impending salary sacrifice clampdown, the government’s own data suggests.

Chancellor Rachel Reeves used her 2025 Autumn Budget to announce a £2,000 cap on the amount workers and their bosses can add into pensions via salary sacrifice before being hit with National Insurance (NI) charges.

The changes will come in from April 2029 and are expected to raise £4.8 billion for the Treasury in 2029/2030 and £2.5 billion in 2030/2031.

But while this may be good for the nation’s finances, it could be a blow for people’s own pension savings.

Research by former pensions minister Steve Webb, now a partner at consultancy LCP, found the government’s own estimates suggest more than 2.8 million workers are expected to cut back on pension saving as a result of the changes.

It comes despite the government-backed Pensions Commission recently warning that people aren’t saving enough for their retirement.

The impact of pension salary sacrifice changes

Salary sacrifice has long-been a popular way for employees to make pension contributions.

Money is added into an employee’s pension pot from their gross pay, adjusting their net income. This also reduces the payroll taxes paid by an employee and employer.

But government guidance shows the cost of the relief has increased markedly, from £2.8 billion in forgone National Insurance contributions in tax year 2016/2017, rising to £5.8 billion in 2023/2024.

Without any change, it is expected that this would almost triple to £8 billion by 2030/2031.

Capping the relief will save the government money.

HMRC has previously disclosed that an estimated 7.7 million employees currently use salary sacrifice to make pension contributions.

Of these, 3.3 million sacrifice more than £2,000 of salary or bonuses.

The Office for Budget Responsibility has already warned that a consequence of the policy could be a reduction in contributions.

A Freedom of Information (FOI) request to HMRC by Webb has revealed the extent of this.

The FOI asked for the government’s assessment of the number of employees that are assumed to cut their contributions in 2029/30.

HMRC said it expects more than 2.8 million workers to reduce their contributions.

This is broken down as 2.2 million earning above the £50,270 upper earnings limit, while 666,000 will generally be basic rate taxpayers.

Webb said: “The government has presented the changes to salary sacrifice for pensions as being a relatively painless way of cracking down on a tax break mostly enjoyed by the well off.

“But these figures show that the effects of the policy will be far more damaging than had previously been admitted.”

He suggests it is hardly ‘joined-up government’ to be stressing the need for more pension saving one day through the Pensions Commission and then implementing a policy that will reduce the pension savings of millions the next.

Webb added: “At a time when the government is running a major Commission to tackle the issue of pension under-saving, it is shocking that a separate government policy will result in more than 2.8 million workers cutting back on pension saving.”

A Treasury spokesperson said: “High earners piled in huge bonuses through salary sacrifice without paying a penny in tax – a taxpayer funded perk largely benefitting the better off.

“Our fair reforms protect 95% of workers earning under £30,000 using salary sacrifice, and as IFS analysis shows, over three quarters of under 30s will be unaffected.”

Inheritance tax is a tricky topic. Taboos around speaking about money and the emotion that comes with thinking about death create a perfect storm for misunderstanding it. But with such complex rules around inheritance, it is a topic well worth talking about – and sooner rather than later.

Lisa Conway-Hughes, a certified financial adviser and founder of LCH Wealth, speaks to Kalpana Fitzpatrick on MoneyWeek Talks about how the inheritance tax regime is changing from April 2027. She reveals her biggest trick to help protect your pension. Tune in now on YouTube or on most podcast platforms.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence.

The government has laid out its design of the so-called mansion tax, which would see owners of homes in England worth £2 million or more slapped with an extra charge from April 2028.

Chancellor Rachel Reeves announced plans for the High Value Council Tax Surcharge (HVCTS) in her 2025 Autumn Budget, claiming it would make the council tax system fairer.

The Treasury proposals are now being consulted on.

Housing Secretary Steve Reed highlighted that under the current council tax system, residents of a band D property in Darlington or Blackpool worth around £400,000 today pay £2,400 to £2,600 annually.

In comparison, those living in a mansion in Mayfair valued at £10 million in Band H are charged around £2,100 per year.

He said: “Previous governments have known how unjust this is, but failed to act. Through the HVCTS, those who own the most valuable properties in the country will pay their fair share.”

The Treasury estimates that fewer than 1% of residential properties in England will attract the HVCTS, which will be paid alongside council tax bills.

Revenue raised through the HVCTS will be used to support funding for local government services.

How high value homes will be valued for the mansion tax

The Valuation Office (VO) will be conducting a targeted valuation exercise to identify properties in scope by using professional valuers and using industry standard automated valuation models that assess sales data and property attributes.

It will identify homes worth more than £2 million as of April 2026 and adjust for differences between properties include the sale price, property type, size, age, number of rooms and parking.

High value homes will then be placed in four bands.

These start at £2,500 for a property valued in the lowest £2 million to £2.5 million band and go up to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year.

Revaluations will be conducted by the VO every five years.

Properties built after implementation of the HVCTS but before the next scheduled revaluation will be valued and banded either on completion or from the day they are occupied.

Homes that have been significantly improved or changed after the implementation date, for example by adding a large extension, will be revalued and banded at the sooner of either the next revaluation or sale of the property, the consultation said.

Who will pay the mansion tax?

It will be the owners of a property rather than the occupiers who pay the HVCTS. This means a landlord rather than a tenant would pay the charge if a home worth more than £2 million was being rented out.

This also means leaseholders will be liable for the mansion tax in a high-value home.

Where a property is held in trust for a child, trustees will be liable.

Mansion tax exemptions

There will be some exemptions to the mansion tax such as for individuals who bought or inherited their home but who now have lower income, or those who experience a temporary change in circumstances such as job loss or ill health.

The government said it will make a deferral scheme available which permits payment of HVCTS to be delayed until a property is sold, where individuals meet specific eligibility criteria.

This will be targeted at those on lower incomes – with an income threshold of £35,000 – and not for second homes or to companies that own property.

Deferral will also be available in certain circumstances where the property is the main home of someone who is disabled or severely mentally impaired.

Mansion tax discounts

The government has proposed offering a discount or exemption to charities and also to properties such as halls of residences, property owned by the Ministry of Defence and by organisations predominantly for the accommodation of those seeking refuge from domestic violence.

There may also be discounts for people who own a property tied to their employment.

The consultation said: “In some sectors, particularly agriculture, business owners may need to live on the site where their business operates for practical reasons. For example, a farmer may need to own and live in a home located on their farm.

“Outside agriculture, it is less common for ownership and occupation to coincide. For example, accommodation used to house members of a religious institution is typically owned by the institution rather than those occupying it.”

When would you need to pay the mansion tax?

The HVCTS will be collected by councils at the same time as council tax.

Once the valuations are ready, local authorities will identify owners and send the first bills in March 2028.

You will be able to contact your local authority for information on deferral and discounts in advance of the first bill or at any time if circumstances change.

Can you challenge the mansion tax?

Homeowners will be able to challenge valuations, similar to how you can appeal council tax charges.

If you think you have been incorrectly billed or banded, you will be able to complain to the VO or the local authority.

Homeowners will be given longer than usual to challenge the new  High Value Council Tax Surcharge (HVCTS).

The government is providing an initial eight month period to challenge banding rather than the typical six month period for mainstream council tax.

As with council tax, where an individual submits a challenge or appeal they will be required to continue paying HVCTS.

Any overpayments will be refunded or liabilities adjusted if necessary.

Sarah Coles, head of personal finance at AJ Bell, said: “There will be plenty of people breaking out the world’s smallest violins for those in expensive homes. However, it could cause problems for people who are asset rich but cash poor. They may decide to bring forward any downsizing plans, and then struggle to sell before the charge kicks in.”

The “vast majority” of pensioners will miss out on the government’s plans for an income tax exemption from next year, new research suggests.

In the 2025 Budget, chancellor Rachel Reeves announced pensioners whose sole income is the basic or new state pension would not need to pay the “small amounts” of tax via simple assessment if the state pension exceeds the tax-free personal allowance from 2027/28.

It was positioned as easing the “administrative burden” but the government has since clarified pensioners in this situation won’t have to pay income tax at all from 2027/28, if their pension exceeds the personal allowance from that point

It came as the chancellor announced the allowance would be frozen at £12,570 until at least April 2031. The threshold last increased in April 2021.

This proposed waiver is intended to stop pensioners solely reliant on the state pension (with no other taxable income or pension ‘increments’) having to pay tax on the payment.

Only around 5.5 million pensioners – or just one in 18 – will be eligible for the concessions, former pensions minister Sir Steve Webb, a partner at pensions consultancy LCP, said.

The full new state pension of £12,548 sits just £22 below the tax threshold and the government expects the rate from next April to rise above the threshold for the first time, given high inflation, wage growth and the triple lock.

The old state pension, by comparison, is much lower than the threshold and even with expected rises looks set to remain so, meaning people solely on the old state pension would not have to pay income tax anyway.

How will the government proposals affect different groups of pensioners?

Webb has called the disparity of treatment between groups of pensioners under the proposed scheme “bizarre”, as LCP’s research flags how few people will actually benefit from the move.

The firm’s new report, ‘The tax treatment of state pensioners’ highlights that anyone who reached pension age before 2016 – when the flat-rate, single tier system replaced the two-tier system of basic plus additional state pension (SERPS or S2P) – will not benefit.

LCP said based on current data for 2025/26, none of the 8.1 million pensioners in the old state pension system will qualify for the exemption. This is either because they are only receiving the old state pension, which at £9,614 a year currently falls below the income tax threshold anyway or – in the case of 6.5 million of them – because they also receive additional state pension (either under SERPS or state second pension) and therefore are receiving a pension “increment” on top of the basic payment.

Similarly, most of the five million people on the new state pension (anyone hitting retirement age after 2016) may also miss out.

The firm calculated that 290,000 are not based in the UK; one million receive pension ‘increments’ or protected payments; 1.1 million have a new state pension rate that will remain below the income tax threshold in the next three years; and 1.8 million have other taxable income, such as private pensions or investment income so they are not solely dependent on the state.

Using the Office for Budget Responsibility (OBR) outlook, LCP calculated the estimated tax levels due over the remaining tax years (under this Parliament), assuming the state pension will rise by 3.7% in April 2027 and then by at least 2.5% in April 2028 and 2029.

Webb said the outlook presents some potential “cliff edges”, pushing people with even £1 of other income into a very different tax position than those without.

He said: “Someone who qualifies for this tax break in 2027/28 does not have to pay tax but someone who just misses out because of £1 of other income… will have to pay income tax not just on the £1 but also on the income tax on their state pension – a further £88. Over time this cliff edge will increase, to £153 in 2028/29 to £220 in 2029/30.”

The table below shows how much income tax would be payable without the proposed concession, for someone solely dependent on the new state pension.

Source: LCP, calculations based on the OBR’s March 2026 Economic and Fiscal Outlook for April 2027/28, then assumes a minimum increase of 2.5%.

Webb gives the example of someone with a small pension pot under auto-enrolment who cashes it out at retirement, therefore taking some taxable income and no longer being classed as solely dependent on the state.

Speaking to MoneyWeek, he said the government’s reference to the old basic state pension might be perceived as an even-handed benefit, whereas it was more of a red herring.

He said: “Freezing tax thresholds for a year or two is manageable. Freezing them for nearly a decade creates more unintended consequences by making a structural shift to the tax system in a ‘back-door’ fashion that isn’t fully thought through.

“Instead, we need a fundamental ‘root-and-branch’ review of the system – why we have tax thresholds in the first place, whether we should have the same rates for pensioners as for working people and so on.”

What are some alternative ideas to the new tax concession for pensioners soley getting the state pension?

He said he appreciates this is being presented as a short-term fix to the end of the current Parliament and is suggesting two potentially ‘cleaner’ solutions.

One option, albeit more expensive than the current proposal, is a broad-brush increase in the tax allowance for all pensioners.

Webb added: “But this would come at a considerable cost because it would also benefit the eight-million-plus pensioners already paying tax. This would not be a targeted solution to the problem.”

He also suggested writing off all small tax bills for pensioners, which would be a cheaper, more targeted option focused on the group of most concern. It would also not discriminate between those on the old and new tax systems.

“But it would still be only a temporary fix and would still leave any future government with a headache as to how to tackle the growing cost of such a measure.”

Webb added that the government already has a line at which it writes off small tax bills but it’s just less well-documented.

“I'm pretty sure HMRC doesn’t send out self assessment demand letters for amounts of £4. It’s taxpayers’ money and why shouldn’t that be paid? We know they clearly have a line already, all I'm saying is just make it bigger.”

LCP also warns the policy presents potential problems for the next government as any write-offs get more expensive over time.

Webb said: “By 2029/30 it looks as though the pensioners who do benefit will have over £200 per year in income tax written off. If the policy continues into the next Parliament it will get more and more expensive with every passing year, but will be hard to switch off – a bit like the triple lock.”

A HM Treasury spokesperson said: “Pensioners whose only income is the basic or new state pension, without any increments, will not have to pay income tax over this Parliament. “

More Londoners have come forward to HMRC to admit they have paid the wrong tax and to correct their records than in any other areas of the UK, new data shows.

A total of 3,296 individuals living in London admitted they had paid the wrong tax in the year to 31 March 2025, according to a Freedom of Information (FOI) request. This is more than the rest of the nine biggest UK cities combined.

The data is related to the number of disclosures made by those "who have not declared the right amount of income tax, capital gains tax, National Insurance contributions, or corporation tax”. They have then sought to make HMRC aware of the error.

Simple mistakes can lead to paying the incorrect amount of tax. But the punishment for paying the wrong tax can still be heavy fines and in cases of deliberate evasion, which is a criminal offence, imprisonment.

Far fewer people made voluntary disclosures to HMRC in Manchester (241 people admitting they had underpaid tax), Birmingham (394) and Leeds (150) compared to London in the year to 31 March 2025.

The lower number of voluntary disclosures in other UK cities highlights the concentration of cases in the capital and its most affluent postcodes.

South West London dominates the table of the top 10 postcodes areas for the number of people approaching HMRC to confess the underpayment of tax, with the number of people coming forward to the HMRC reaching 492.

Graham Caddock, tax director at accountancy firm Lubbock Fine, which submitted the FOI, said anyone who has underpaid tax deliberately or accidently should come forward to the HMRC as soon as possible.

Caddock said: “HMRC’s sophisticated approach to detecting tax errors using systems such as their Connect database, is targeting tax evasion more effectively than ever before.”

Voluntary disclosures submitted to HMRC per postcode for the tax year 2024/2025

Source: HMRC via an FOI request

How to avoid a fine for paying the wrong tax

Disclosing mistakes to HMRC as early as possible is the best way to avoid or reduce hefty fines for paying the wrong amount of tax.

Caddock said: “Taxpayers who have purposely or accidentally avoided their tax obligations are starting to realise it is more likely than ever that they will be caught.

“For anyone who has accidentally or deliberately underpaid their taxes, it is more important than ever to disclose and admit tax errors early rather than wait for them to be discovered.”

Common tax mistakes

Some of the common reasons why people underreport their tax obligations include:

• Undeclared rental income, such as letting out a property or room through platforms like Airbnb
• Income from side businesses, cryptocurrency trading, or offshore accounts, which can be difficult to track and report accurately
• Other self-employed income streams including freelance work, social media influencing, and brand collaborations, which may also go unreported

Caddock said: “With income from side businesses, property or offshore investments becoming more common and visible to HMRC, the risk of discovery is highly likely.

“Voluntary disclosures to HMRC are the best way to correct these errors before they become bigger problems leading to hefty tax penalties. In many cases HMRC can go back up to 20 years to collect unpaid taxes.”

How much are HMRC tax penalties?

Deliberate income tax evasion can lead to six months in prison or a fine of up to £5,000. In serious cases, penalties may be seven years’ imprisonment or more and unlimited fines.

When it comes to self-assessment, you’ll get a penalty if you need to complete a tax return and you send your return late, or pay your tax bill late.

If you register for self-assessment late – after 5 October and do not pay all of your tax bill by 31 January – you may get a ‘failure to notify’ penalty. This penalty is based on the amount still left to pay and you’ll receive it within 12 months after HMRC receives your self-assessment tax return.

If you send your tax return late you’ll get the following late filing penalties:

• an initial £100 penalty
• after three months, additional daily penalties of £10 per day, up to a maximum of £900
• after six months, a further penalty of 5% of the tax due or £300, whichever is greater
• after 12 months, another 5% or £300 charge, whichever is greater

If you pay your tax late you’ll get penalties of 5% of the tax unpaid at:

• 30 days
• six months
• 12 months

You’ll also be charged interest on the amount owed.

MoneyWeek has approached HMRC for comment.

Inheritance tax (IHT) is often described as the “most hated” tax out there, but a significant number of people know very little about how it works.

Around 71% of UK adults do not understand inheritance tax, a survey by investment manager Schroders found, and it’s not hard to see why.

The tax has a number of different allowances, caveats, and thresholds that can make it an incredibly complex topic – but sooner or later most of us will have to contend with it.

As tax-free thresholds remain frozen and house prices rise, plus new rules about inheritance tax on unused pensions loom, more people face being affected by the levy.

How much do you know about inheritance tax? Test yourself in our quiz.

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• Six IHT myths debunked
• How you could cut your inheritance tax bill by £37,000
• What is the 7 year inheritance tax rule and how does it help cut your bill?

The £1 million inheritance tax-free allowance figure is one of those numbers that has taken on a life of its own. Most people know about it, but very few have checked whether it applies to them.

At first glance, it seems straightforward. A couple has two nil-rate bands – also known as inheritance tax-free thresholds – at £325,000 each and two main residence nil rate bands at £175,000 each. Add the allowances together and you get £1 million you can pass on free of inheritance tax, which is otherwise charged at up to 40%.

But in reality, it is more complicated.

For example, if you’re married or in a civil partnership, any unused inheritance tax-free threshold can be added to your partner's threshold when you die. This tax perk does not apply to unmarried couples.

Sue Allen, chartered financial planner at Chester Rose Financial Planning, warns. “Care needs to be taken to ensure you qualify or know where you stand,” she says.

The issue usually lies with the £175,000 residence nil-rate band, which you could get if you give your home to your children or grandchildren. This extra allowance is often treated as part of the standard allowance. But it isn’t – and certain rules mean you may not get it.

When does the £1 million inheritance tax-free allowance not apply?

In practice, there are a few common scenarios where the main residence nil rate band is assumed to apply but doesn’t.

1. Couples without children

Couples without children are a straightforward example of where the £1 million inheritance tax-free allowance doesn’t apply.

“It is common for them to assume they are comfortably within the £1 million threshold, only to find that, without direct descendants, the main residence nil rate band doesn’t apply to them,” said Allen.

“At that point, the IHT allowance drops to £650,000 between them, which can come as quite a shock.”

2. Estates worth more than £2 million

The £2 million inheritance tax threshold acts as a tapering point for the residence nil-rate band. If your estate – total assets minus debts – is worth more than £2 million, the residence nil-rate band is reduced by £1 for every £2 that the estate exceeds this threshold.

If an estate's net value exceeds £2.35 million, the residence nil rate band is completely lost for a single individual. For a surviving spouse, the threshold for complete loss is £2.7 million.

“There is a growing number of people, particularly in London and the Southeast, who find themselves over the £2 million threshold without really thinking of themselves as having large estates. A property and a reasonable level of investments can get you there,” said Allen.

“We often find that, as a result, these clients don’t qualify at all for the main residence nil-rate band.”

Inheritance tax on pensions is due to change in April 2027, with most pensions being treated as part of the estate by HMRC for IHT purposes from then. This will increase the value of estates, potentially pushing them over the £2 million threshold when the residence nil rate band starts to taper.

3. Downsizers

Later-life decisions can create further complications when it comes to inheritance tax thresholds. Downsizing, for example.

There are rules that allow you to preserve a percentage of the main residence nil rate band when you sell a property – known as the downsizing addition or downsizing relief. However, these rules are not straightforward and require careful planning.

The amount of the downsizing addition will usually be the same as the residence nil rate band lost when the former home is no longer in the estate. Again, the amount of the preserved main residence nil rate band needs to be left to direct descendants to qualify.

It will also depend on the value of the other assets left to direct descendants. The downsizing addition cannot be more than the maximum amount of residence nil rate band available if the sale or downsizing had not happened.

The estate’s personal representative must make a claim for the downsizing addition within two years of the end of the month that the person dies. HMRC can extend this time limit in some circumstances.

You do not have to tell HMRC when the downsizing move, sale or gift of the former home happens. The estate’s personal representative makes a claim for residence nil rate band and any downsizing addition when filling in the inheritance tax returns.

You should keep the details of the move, gift or sale so that the estate’s personal representative can get that information when they make the claim.

You can only take one move, sale or other disposal of a former home into account for the downsizing addition. If the person that died downsized more than once, or sold or gave away more than one home between 8 July 2015 and the date they died, the estate’s personal representative can choose which to use to calculate the downsizing addition.

4. Blended families

Blended families are another area where things don’t always align when it comes to inheritances. They are increasingly common, but the inheritance rules haven’t kept pace. This can often lead to disputes over inheritances.

“It’s easy for assets to be passed in a way that makes perfect sense from a family perspective but doesn’t meet the technical requirements for the main residence nil-rate band,” said Allen.

For residence nil rate band purposes the direct descendant is:

• a child, grandchild or other lineal descendant
• a spouse or civil partner of a lineal descendant (including their widow, widower or surviving civil partner)

This also includes:

• a child who is, or was at any time, their step-child
• their adopted child
• a child fostered at any time by them
• a child where they’re appointed as a guardian or special guardian when the child is under 18

The person who inherits the home does not have to be under 18. But a person’s step-child is only someone whose parent is, or was, the spouse or civil partner of that person – cohabiting doesn’t count.

Direct descendants also do not include nephews, nieces, siblings and other relatives.

How to avoid the £1 million inheritance tax trap

The key thing to do is forget the £1 million inheritance tax-free threshold – unless it actually applies to your specific situation. If you’re able to, using gift allowances and giving gifts early on could reduce a potential inheritance tax bill, as inheritance tax is not charged on gifts made more than seven years before death.

“Plan around the actual position,” said Allen, from Chester Rose. “In many cases, that means starting to gift earlier rather than later, as the seven-year rule is only useful if there is enough time for it to work.”

Regular gifting out of surplus income is also often overlooked, despite being one of the more practical options available.

“However, careful record-keeping and a clear understanding of the rules are essential, as not all assumed income qualifies. It is also important to have a cash flow plan in place that identifies how much you can afford to gift and when. You do not want to leave yourself short in later life,” said Allen.

Wills might need to be revisited to ensure the structure doesn’t prevent the claiming of the main residence nil rate band, or that planning can be undertaken after death to ensure this can be claimed. “This is particularly important when trusts are incorporated into wills,” said Allen.

For those close to the £2 million threshold, even small adjustments can help preserve part of the main residence nil-rate band. Without such planning, it can disappear entirely.

“The £1 million figure isn’t wrong, but it is conditional,” Allen said. “The difficulty is that most people don’t realise how conditional it is until they look more closely at their own situation. By then, the number they have relied on for years isn’t quite right.”

Inheritance tax planning can be complicated and is highly individual to specific circumstances. It’s always a good idea to get specialist legal and financial advice before acting.

Millions more people have been dragged into paying income tax in recent years as official data highlights the impact of fiscal drag.

Income tax thresholds have been frozen since 2021 and will remain so until 2031.

This is causing fiscal drag, where taxpayers are pushed into higher tax bands and face increased bills without even getting a pay rise.

The government’s latest income tax tax data shows an additional 2.17 million people were dragged into paying income tax in 2023/24.

Meanwhile, the total income before tax received by taxpayers in the tax year 2023/24 was £1.53 trillion – up by 9.8% annually.

This has pushed income tax liabilities up by around 11.9% (£29.1 billion) to £274 billion.

David Little, partner in financial planning at wealth management firm Evelyn Partners, said: “This data reveals how the powerful tide of fiscal drag is increasing the UK tax burden by sweeping millions into higher tax brackets, and into paying tax for the first time.

“Both the number of taxpayers in each band and the amount of income tax being paid to the Treasury are surging every year – exactly as chancellors past and present have intended.”

The data reflects the period when the Conservative Party was in government but chancellor Rachel Reeves has continued the freeze since Labour came to power, meaning more people could be hit with higher taxes.

The impact of fiscal drag

Income tax rates may not have increased but frozen thresholds mean people are quickly hit by fiscal drag as they move faster into higher tax brackets when they get a pay rise.

The figures show there was an increase in the number of basic rate taxpayers of 1.15 million or 4.1%.

The number of higher rate taxpayers increased by 654,000 (12.8%) to 5.76 million, while the number of additional rate taxpayers increased by 324,000 (56.8%)to 893,000.

Earning £67,400 before tax now puts you in the top 10% of earners, the data shows, while £93,600 puts you in the top 5% and £207,000 in the top 1% of earners.

Rachael Griffin, tax and financial planning expert at Quilter, said: “While this period did see fairly large increases in pay, much of this was simply to keep pace with high inflation. When combined with frozen thresholds, it has left many taxpayers facing materially higher tax bills with little to no improvement in their standard of living.

She said this shift is no longer confined to traditionally high‑paid professions, adding: “Experienced teachers, senior nurses and police officers are increasingly being pulled into higher rate tax through incremental pay rises, overtime or progression, rather than genuinely high earnings. What was once a marginal issue is now becoming a mainstream experience across large parts of the workforce.”

Who pays the most tax?

Despite talk of the need for wealth taxes, government data actually shows that high earners are already paying the largest share of tax.

In 2023/24, the figures show additional rate taxpayers paid 37.7% or £103 billion of tax despite making up just 2.4% of people.

Higher rate taxpayers paid 32% at £87.6 billion, making up 15.7% of people.

Meanwhile, at 29.4 million, most taxpayers pay the basic rate, accounting for just 29.9% of tax, and making up 80.1% of people.

There are other sources of income that are getting caught though, which can hit all types of taxpayers.

The number of taxpayers of pension age increased by 1.02 million or 14.4% since the previous tax year, as the triple lock continues to push retirement incomes up.

This means people of state pension age account for 22.2% of all taxpayers and 16.2% of total income.

There were almost 8.2 million people of state pension age paying tax and 7.8 million people paying tax whose main source of income was their pension, the research shows.

Griffin added: “While part of this increase reflects demographic change as the pension‑age population grows, rising retirement incomes combined with frozen allowances are clearly playing a major role.

"The triple lock has been vital in protecting pensioner incomes during a period of high inflation, but its interaction with frozen personal allowances is creating unintended consequences. In practice, state pension increases designed to preserve living standards are increasingly being clawed back through tax, particularly where even modest private pension income is involved.”

The frozen personal savings allowance and lower dividend allowances are also hitting savers and investors.

Total tax income from property, banks and building societies, dividends and other income increased by 17.2% from £107 billion to £125 billion.

Interest received from banks and building societies was the main driver of growth.

The number of taxpayers with savings interest increased by 28.4% from 15.3 million to 19.6 million, whilst the total amount of savings interest increased by 219%, from £5.75 billion to £18.3 billion.

Griffin said: “Taxable savings interest more than tripled as rates rose, catching millions of savers off guard. While rates have edged down and are unlikely to return to their recent peaks, the episode has reinforced the importance of using ISAs to shelter savings from income tax.

“For those with a longer‑term horizon, it may also prompt a rethink about relying too heavily on cash returns that may already be past their high point.”

How to reduce your tax bill

There are ways to hold on to more of your cash rather than giving it to the taxman.

Savers and investors can make use of their £20,000 ISA allowance to avoid dividend or savings tax. However, the cash ISA allowance for under 65s is being cut to £12,000 from April 2027 so it may be worth putting as much in as possible beforehand.

Another option is to use salary sacrifice to reduce your gross earnings.

One of the most popular routes is by increasing your pension contributions.

However, the benefits of this are being slightly reduced from April 2029 when only the first £2,000 will benefit from National Insurance relief.

Older taxpayers may also want to consider how and when they take pension income to reduce the tax burden.

But bear in mind that unused pension savings will form part of a person’s estate for inheritance tax from April 2027.

Little added: “Beyond making pension contributions, more esoteric schemes to reduce income tax include subscribing to Venture Capital Trusts and Enterprise Investment Schemes, but these are not going to be suitable for most people due to the higher risks involved.

“Finally, drifting into a higher tax band will raise the rate of tax you pay on capital gains and savings interest, and also reduce your personal savings allowance, so those looking to minimise their tax burden must ensure they are sheltering savings and investments where possible in ISAs and using their annual tax exemptions. Couples can use their combined allowances strategically, especially where one is in a lower tax band for earnings.”

From acorns grow oak trees: that's the sales pitch from fans of the Seed Enterprise Investment Scheme (SEIS), though the scheme's offer of more generous tax incentives than any other similar investment initiative is also part of the appeal. And with other opportunities to shelter from rising taxes now diminishing, many experts think the SEIS is set to become more popular than ever in the current tax year, which began earlier this month. Introduced in 2012, the SEIS aims to help very small and very young companies raise money to fund their growth. These are businesses that may lack the trading record necessary to borrow money from the bank, or to raise capital from other sources. Without access to finance, their growth may be stunted, preventing them from fulfilling their potential.

We really are talking about acorns. Raising money through the SEIS is only an option for businesses that have been trading for less than three years, which have assets of no more than £350,000 and fewer than 25 employees. There are also several more technical qualifying rules that limit SEIS eligibility to start-ups and very early-stage businesses. Inevitably, many of these businesses fail, taking investors' money with them. A recent study from Warwick Business School put the three-year survival rate for start-ups in the UK at 47% – falling to just 10% after ten years. Even businesses that show some early success – those that might therefore catch investors' eyes – often don't progress. Just 7% of businesses making it to £1 million of turnover go on to surpass £3 million, the Warwick study found.

That said, some start-ups do turn into scale-ups. New investors come in at higher valuations; SEIS investors who took the early risks may be able to exit at a handsome profit. It's even possible for SEIS-backed firms to make it all the way to a stock market listing.

SEIS can offer some extraordinary tax breaks

One example of a successful SEIS investment is Cognism, now regarded as one of Europe's leading data technology companies. The business raised SEIS funding in 2017, two years after its launch, with investors then able to exit when the business secured new backers in 2022; their returns were estimated to be worth around 40-times their initial stake. Only a handful of such winners can be rocket fuel for a SEIS portfolio, says Alex Davies, founder and CEO of investment platform Wealth Club. “The SEIS offers the chance to back very early-stage businesses with genuine high-growth potential, while recognising that most won't succeed,” Davies says. “The key is that you don't need many winners to generate significant returns.”

In part, that's because a few very large gains will compensate you for losses elsewhere. But the tax incentives offered on the SEIS – the government recognises that investors need some encouragement to risk their money – also provide plenty of insulation. Those tax breaks genuinely are quite something. You can invest up to £200,000 each tax year through the scheme, but you get 50% income-tax relief on this subscription, reducing its cost by half as long as you're earning enough to claim relief in full. In addition, you can claim capital-gains-tax reinvestment relief – if you've got taxable profits on other investments, you can reduce the bill by 50% by reinvesting these gains through the SEIS.

There's also support later on. Once you've held shares in a SEIS company for three years or more, any profits you make on the investment are free from capital-gains tax. Alternatively, if the business goes bust, you can claim loss relief, setting your losses against other taxable income you may have. SEIS investments also get preferential treatment on inheritance tax. The first £2.5 million worth of qualifying investments don't count towards the value of your estate for inheritance tax (IHT) purposes; on investments above this threshold, IHT is charged at only 20%, half the usual rate.

The combined effect of all these reliefs is significant. “SEIS tax reliefs turbocharge returns when things go well and cushion the impact when they don't,” explains Davies. “In today's high-tax environment, it's increasingly difficult for non-tax-advantaged investments to compete.” If you invest £100,000, say, in a portfolio of SEIS investments that returns 50%, your effective gain after income tax and capital-gains reinvestment relief will be 112%. But even if there's no growth and you only get your starting capital back, you would still be making a 62% gain.

Alternatively, the tax reliefs limit downside risk. If your £100,000 investment halves in value, you'll still be making a positive return of 12% after the income-and capital-gains tax breaks. Or, in the worst case scenario, where your investment ends up worthless, the actual loss on your initial £100,000 stake would only be £15,500.

Such perks look even more attractive given that the tax reliefs available on similar schemes are being reduced. The upfront income-tax relief on offer to investors in venture capital trusts (VCTs) – which also invest in early-stage businesses – fell from 30% to 20% on 6 April. At the same time, the tax burden that investors in these schemes are often looking to mitigate is increasing. Most notably, the IHT net will shortly be extended to include unused pension savings, while exemptions for business and agricultural assets are being eroded. Together with an ongoing freeze on the thresholds at which IHT becomes payable on estates, this has the potential to drive up bills for many families.

In fact, the SEIS is one of the few tax-efficient investment schemes to offer relief on IHT – along with its big brother, the Enterprise Investment Scheme (EIS). Cash and assets held within an individual savings account (ISA), for example, will count towards the value of your estate for IHT purposes. The same is true of VCTs. No wonder that the SEIS is attracting more interest, with investment in qualifying businesses already on an upward trend. “The SEIS is a key part of the UK's dynamic start-up environment, and recent changes with the reduction of tax relief for VCT investors make it even more attractive by comparison,” says Matt Cooper, co-CEO of the private market investment platform Crowdcube.

Pause and think about the risk

In the 2023-2024 tax year, the most recent period for which data is available, 2,290 companies raised £242 million through the SEIS, up more than 50% on the previous year, partly thanks to a tweak to the rules that enabled more companies to participate and to raise more money. Almost 10,150 investors put money into companies qualifying for the scheme, a 23% increase compared to the 2022-2023 tax year. The early indications are that the SEIS saw further growth in 2024-2025, with HM Revenue & Customs receiving 3,195 applications for “advanced assurance” – essentially requests from companies for guidance that they qualify for the SEIS scheme before they seek investment. That was 18% more than in the previous year.

Nevertheless, investing in the SEIS simply for tax reasons would not be sensible. Given the elevated risk profile of SEIS companies, this is an investment only suitable for wealthy and sophisticated investors who feel comfortable with the possibility of losing some or even all of their money. You will almost certainly have made good use of ISA and pension allowances before thinking about the SEIS; you may well have invested in VCTs and the EIS too. Also, remember that the scheme is most tax-efficient for investors who have other capital gains to roll over into it.

Still, the good news from an investment perspective, argues Joseph Zipfel, the chief investment officer of early-stage investment specialist SFC Capital, is that the SEIS has matured since its launch more than a decade ago. “The risk profile has changed materially,” he says. “While early-stage investing will always carry risk, the underlying quality, maturity and resilience of SEIS-backed companies has improved over the last ten years.”

The explanation, Zipfel believes, is that the UK's start-up ecosystem has improved markedly in terms of the amount of support available to entrepreneurs, with help on offer from universities, incubators, accelerators and government-backed organisations such as the British Business Bank and Innovate UK. Business founders are more sophisticated as a result – and the backing available has encouraged a broader range of people to launch their own enterprises.

Moreover, many SEIS-eligible businesses are now run by more experienced founders. “The SEIS has funded more than 2,000 companies every year for more than a decade; one of the most important consequences of this scale is the recent emergence of a second wave of entrepreneurs building their second or third venture,” Zipfel adds. “These founders bring hard-earned lessons from their first businesses, whether successful or not. They are typically more disciplined in capital allocation, clearer on go-to-market strategy, and faster at identifying what does not work.”

Add in the changes to the SEIS rules made in 2023, which saw slightly larger businesses become potentially eligible, and the overall picture is of a more resilient set of opportunities. “This evolution does not eliminate risk,” says Zipfel, “but it does mean that the starting point is much stronger and the overall risk-adjusted opportunity has improved materially.”

How to invest in the SEIS

There are two ways to take advantage of the investment opportunities and tax incentives that the SEIS offers. Your first option is to invest directly in a qualifying company that is currently raising money. The firm will need to have checked its SEIS eligibility with HMRC and should be able to tell you that it has received assurance that investments are likely to qualify.

The easiest way to find such opportunities is via a crowdfunding site – an online platform where early-stage companies appeal directly to retail investors. Platforms including Crowdcube, Crowd for Angels, Republic Europe (until recently known as Seedrs) and SyndicateRoom all feature SEIS-eligible businesses making pitches to investors.

The advantage of investing directly is that you have total control over which firms you decide to back. The downside is that it may be harder to spread your bets – you'll need to invest in multiple qualifying companies to avoid the danger of being exposed to a single high-risk business, or even a small handful. You'll also need to do your own due diligence.

Option two, therefore, tends to be more popular. Many investors opt for a SEIS fund – essentially a portfolio of ten to 25 or so qualifying companies chosen by a professional investment manager who specialises in investing in early-stage companies. Specialists in this area include Fuel Ventures, Guinness, Haatch and SFC. Wealth Club is one central point of access to a choice of SEIS funds.

With a fund, you get diversification and the benefit of the manager's expertise and experience. Funds may also have access to a wider range of opportunities, including attractive companies not on your radar. Investing in SEIS funds can also be a useful way of spreading risk, “although this needs to be balanced against the likelihood of higher returns from a direct individual investment if it goes well”, says Crowdcube's Matt Cooper.

There are downsides to the fund approach, too. Expect to pay much higher charges than on other types of collective investment funds, which will dilute your returns. You'll also be surrendering control of investment decisions and losing the direct relationship with individual firms, which many investors enjoy.

Finally, note that once you've made your investment, the business or fund will send you a form so that you can claim the various tax reliefs through your self-assessment tax return. This paperwork – known as the SEIS3 form – is critical; you won't be able to apply for relief from HMRC without it.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Another week, another FTSE 250 company disappears. On Monday, William Hill's owner, Evoke, said it was in talks with Bally's over an offer for the company that would value it at more than £200 million. It may not seem like much for such a well-known brand, but Evoke is weighed down by debts that have depressed the value of the shares. The bigger problem, however, is that it is grappling with the huge rises in gambling taxes imposed by chancellor Rachel Reeves in the last Budget. She pushed up remote gaming duty, which applies to online casino and roulette games, from 21% to 40%, and online betting duty from 15% to 25%. The rate for betting at old-fashioned bookmakers on the high street was left at 15%, but that was little consolation for the major chains, which these days make most of their money from their apps, and mainly use the shops as a form of advertising.

It is not just Evoke that has been hit by that tax rise, although it has suffered more than most as its operations are concentrated in Britain. Paddy Power said late last year that it was closing 57 of its British shops with the loss of more than 250 jobs, while Entain, the company that owns Ladbrokes and Coral, has also started to close branches. Ahead of the tax rise, Betfred warned it might close all of its more than 1,200 physical stores if the new levies went ahead, and while that has yet to happen, it might well over the next year or two. Add it all up, and the outcome is clear. The tax rise has led to a big wave of closures across what has always been a huge industry.

There are three big problems with gambling tax rises. First, they will deal another big blow to the high street at a time when it is already facing a wave of closures of retailers, cafes and restaurants. There are more than 5,500 betting shops across Britain, at least before the latest round of closures. That is more than triple the number of bookshops and double the number of newsagents. Sure, that branch of Coral or William Hill, with its tatty biros and slightly dodgy-looking punters, was never exactly the most cheerful place in the typical town centre. But even so, it paid business rates, employed people and, in a small way, helped keep the high street alive. If they all start to close down, nothing will replace them. There will just be a few more dismal boarded-up shopfronts.

Raising gambling taxes will crush a British success story

Next, it does not look as if gambling tax rises will raise anything like as much money as expected. The £1.1 billion in extra cash forecast to roll into the Treasury assumes that there will only be very minor changes to behaviour (it would be £1.8 billion with no change). But that hardly seems plausible. If there are fewer physical shops, if the odds are less attractive and less money is spent on online marketing, the casual punter who puts the occasional fiver on the Cup Final or the Grand National will drift away. The hardcore gamblers will use a “virtual private network” that disguises which country you are visiting the internet from, to bet offshore, or else to gamble on the fast-growing prediction markets. Either way, the tax will raise far less than forecast.

Finally, raising gambling taxes will damage a major British industry. Companies such as Bet365 and Entain are among the global leaders of an industry that is worth well over $250 billion worldwide and growing all the time as legal restrictions are relaxed. A robust domestic market is vital if entrepreneurs are to flourish and established businesses are to succeed on the global stage. You might think the Treasury would want to back such success stories. After all, there are not that many of them any longer. Instead, it seems determined to tax them into extinction.

It seems extraordinary that the Treasury hasn't worked out by now that when you increase the taxes on an industry, it gets a lot smaller very quickly. But it looks as if it hasn't and will have to relearn that lesson all over again, and in the most expensive way possible. Even if the Treasury gets its extra billion, it will, in the process, have crippled a major British industry, worsened the crisis on the high street and pointlessly destroyed thousands of jobs. Even for the most hopeless chancellor of the last 50 years, that seems like a losing bet.

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HM Revenue and Customs (HMRC) is cracking down on property valuations in inheritance tax (IHT) returns as rising house prices see more families dragged into the taxman’s net.

The number of cases HMRC referred to the Valuation Office Agency (VOA) rose by 23.5% from 11,845 in the 12 months to September 2024 to 14,631 in the year to September 2025, according to new Freedom of Information (FOI) figures obtained by private wealth and law firm TWM Solicitors.

Executors of estates have to include property valuations in inheritance tax returns which HMRC then uses to determine how much an estate should be taxed.

However, HMRC can refer cases to the VOA if it believes a property has been incorrectly valued, with TWM finding HMRC is ramping up its scrutiny of property valuations.

The solicitors said its lawyers would usually be contacted about incorrectly valued homes “once or twice every few years”, but this was now happening more frequently.

It comes as frozen inheritance tax thresholds and rising house prices push more people into handing over money to the taxman.

Laura Walkley, head of the private client team at TWM, said: “HMRC is clearly focusing on property valuations as a significant potential source of revenue. There has been a noticeable shift towards questioning figures submitted in inheritance tax returns, rather than accepting them at face value.”

An HMRC spokesperson said: “The majority of people pay the correct amount of inheritance tax. As has always been the case, where it is suspected an individual has not, investigations can be opened.”

Why it’s important to value a property correctly

Executors need to value a property correctly so HMRC has an accurate view of how much inheritance tax should be paid.

If the property within an estate sells for significantly more than its date of death value – the value of the home on the date the person died – HMRC may ask the VOA to examine the valuation, Walkley explains.

If it is found that the date of death value was higher than the one included in the inheritance tax return, the estate is charged additional inheritance tax on the difference between the two values.

HMRC will also apply interest (of 7.75% per year) on the extra tax due from six months after the end of the month of the death. So, if the person died in January, the interest would begin accruing from 1 August that same year.

If HMRC finds the executor intentionally undervalued the property [in order to pay less inheritance tax for example], or did not take reasonable care in obtaining a valuation, it may apply a penalty in addition to the interest.

“Broadly speaking, HMRC could deem a failure by the executors to value property in accordance with established best practice as careless,” Walkley explains.

How to value a property correctly

According to Walkley, executors are considered to have taken reasonable care if they either get a survey carried out on the property by the Royal Institution of Chartered Surveyors (RICS) or have three estate agents carry out valuations and take the average of the three.

In any case, the key to valuing a property for inheritance tax purposes is that the value is the open market value of the property at the date of death, she says.

She adds: “There is a perception that there is such a thing as a ‘probate value’, which is lower than the open market value, but this is incorrect.”

How you can pay less inheritance tax on property

There’s not much you can do about rising house prices, but there are steps you can take to ensure your beneficiaries pay less inheritance tax on an estate including property.

Leave your property to a child or grandchild and transfer bands to a spouse or civil partner

Inheritance tax is usually payable on estates worth £325,000 or more but this increases by £175,000, known as the residence nil-rate band, if you are leaving your home to a child or grandchild. You can pass this £175,000 allowance to a partner if you die.

This means couples who are married or in a civil partnership could leave up to £1 million to loved ones and they wouldn’t owe any inheritance tax.

Do note, for every £2 your estate is worth more than £2 million, you lose £1 of this residence nil-rate band until it disappears. This means estates left by a single person worth £2.35 million receive no residence nil-rate band, while for couples it’s £2.7 million.

Charlene Young, senior pensions and savings expert at investment platform AJ Bell, says the gradual loss of the residence nil-rate band for estates worth more than £2 million is “potentially storing up another tax trap for wealthy pensioners with high value properties”.

Sell your home

Gifts of any size are free from inheritance tax if made seven years or more before your death, so you could, in theory, sell your home and its value would end up outside your estate if you live long enough, Young points out.

However, if you want to carry on living in the property, you will have to pay the new owner rent at market value.

“If you don’t, the value of the property simply gets added back to your estate, no matter how long has passed under the gifts with reservation rules,” Young says.

We look at how to claim money back if asset prices fall in a separate guide.

Inheritance tax bills are on the rise and there are some parts of the UK where the liability is set to hit six figures.

Despite a £325,000 threshold and a £175,000 main residence allowance, frozen thresholds, high house price growth and rising asset values have pushed increasing numbers of estates into the inheritance tax trap.

Research by The Private Office reveals that homes in 136 local authorities are already exposed to inheritance tax in 2026, with estimated average liabilities ranging from just over £150 to more than £340,000 per estate.

The wealth manager analysed average property prices by local authority and estimated inheritance tax liabilities even with the nil-rate band and main residence allowance.

The Private Office’s analysis found that Kensington and Chelsea ranks as the UK’s most expensive inheritance tax hotspot, with most liability in London and the South East of England.

More regions could be hit from 2027 as well when unused pension savings are included in inheritance tax calculations.

Here are the regions facing the highest inheritance tax bills.

The regional inheritance tax divide

The data suggests a regional imbalance in inheritance tax exposure across the UK in 2026, with liabilities heavily concentrated in London and the South East.

This is compounded by higher house prices in these regions meaning an estate could easily surpass the current frozen thresholds.

Kensington and Chelsea tops the list, where the average property value is £1.18 million.

The estimated IHT liability reaches £343,924 per estate and the total average estate values exceed £1.3 million, according to the research.

Other London boroughs, including Camden, Richmond upon Thames and Hammersmith and Fulham, also show projected tax bills well into six figures. Beyond the capital, affluent southern areas such as Elmbridge, St Albans and Windsor and Maidenhead remain within taxable territory, reflecting sustained house price growth across commuter-belt locations.

In contrast, northern England features very limited exposure at higher levels, with only a small number of areas approaching the tax threshold.

Trafford is the only northern authority appearing in the dataset, with an estimated average inheritance tax liability of around £20,814.

The impact of pension changes on inheritance tax

More estates could be caught as a result of pension changes coming next year.

From 6 April 2027, unused pension funds will be included within an individual’s estate for inheritance tax purposes.

By combining average property values across 372 local authorities with estimated pension wealth, the research indicates that 152 areas previously below the threshold could become liable, bringing the total number of exposed local authorities to 288.

New regions that could face inheritance tax bills for the first time after the pension changes include Stevenage in Hertfordshire as well as the City of Edinburgh in Scotland and Cardiff in Wales.

Pippa Vick, financial adviser at The Private Office, said: “Inheritance tax is increasingly becoming a property tax by default.

"Many families don’t consider themselves wealthy, yet long-term house price growth – particularly in London and the South East – means their estates can face substantial tax bills. Without proper planning, beneficiaries may be forced to sell assets simply to settle the liability. Early advice and structured estate planning can significantly reduce the eventual tax burden.

“Pensions have long sat outside inheritance tax calculations, so bringing them into scope has a major regional impact. In high-property-value areas, the effect is dramatic, but even in more affordable regions, families who previously expected no inheritance tax may now face a bill. Planning early will be crucial.”

Business owners and farmers must play by strict new rules when it comes to passing on assets, after changes went live at the start of the new tax year on 6 April. But some families will be left much worse off than others under the switch.

The beneficiaries of unmarried couples, divorcees and single farmers and business owners could face paying potentially hundreds of thousands of pounds more in inheritance tax compared to if they had been married, following the implementation of the controversial changes to some IHT reliefs this month.

Sean McCann, chartered financial planner at NFU Mutual, said: “While married couples can potentially leave up to £6.3 million of qualifying agricultural and business assets free of inheritance tax, the same is not true for single farmers or divorcees who haven’t subsequently remarried who are limited to a maximum of £3.15 million.”

What are the new APR and BPR rules?

Businesses and farms are entitled to what’s known as business property relief (BPR) and agricultural property relief (APR) – these reliefs limit the amount of inheritance tax due.

In the 2024 Autumn Budget, the government announced plans to cap the value of agricultural properties and businesses that could be passed on free of inheritance tax to £1 million – anything above that level would only get 50% tax relief.

Inheritance tax is charged at 40%, so the change would effectively introduce a 20% tax rate on the value of inherited farms or businesses over £1 million.

Following pressure from farming and business groups, the government amended the policy in December 2025, announcing it would raise the cap to £2.5 million.

It also permitted the allowance to be inherited by a spouse or civil partner – on top of existing allowances of £325,000 IHT-free per person, plus the nil rate residential allowance of £175,000 per person – boosting the amount that could be passed on IHT-free to £5.65 million.

But certain groups are set to miss out on the more relaxed rules, leaving their families with much bigger inheritance tax bills.

Hardest hit by new inheritance tax rules

Married couples and civil partners have significant advantages when it comes to inheritance tax planning. Anything left to the surviving partners after the first death is normally free of IHT.

The survivor can also benefit from any unused part of their late spouse’s £2.5 million inheritance tax-free APR and BPR allowance as well as the £325,000 inheritance tax-free allowance.

Unmarried couples do not benefit from the spousal exemption, meaning that leaving assets to a surviving partner could trigger a bigger IHT bill. In this case, while the deceased’s £2.5 million APR and BPR allowance and £325,000 tax-free allowance would cut the amount of IHT payable, only the survivor’s allowances would be available on the second death when passing assets to the younger generation – not the combined allowances as would be the case of a married couple.

Divorcees also miss out – while widows and widowers can benefit from their late spouse’s unused £2.5 million 100% APR/BPR allowance, regardless of whether they owned agricultural or business assets, the same is not true of divorcees who have not remarried. Beneficiaries of divorcees can only benefit from the person who has died’s allowances.

Bigger inheritance tax bill

McCann from NFU Mutual has highlighted one example which shows the significant difference in the IHT bill depending on whether the deceased is a widower or a divorcee.

Take Steve, who owns a farm and business assets worth £6.5 million. He has:

• 300 acres worth £3.5 million
• machinery and stock worth £1 million
• farmhouse and buildings worth £2 million

The table shows the difference in how Steve would be treated for inheritance tax purposes depending on whether he is a widow or a divorcee.

Ways to avoid inheritance tax

There are some strategies those affected by the changes to agricultural property relief and business property relief can use to help avoid inheritance tax or reduce their inheritance tax bill.

Couples who are not married face additional complexities as they don’t benefit from the tax-free exemption available to spouses. This means leaving assets to a common law partner could trigger an inheritance tax liability, followed by a second charge on their subsequent death.

“Unmarried couples who want to maximise the amount passed on to younger generations could consider using the £2.5 million 100% APR and BPR allowance and £325,000 tax-free allowance to leave assets to the younger generation on first death, leaving the survivor free to do the same,” said McCann.

For those unmarried couples who don’t wish to get married, it’s important to take advice on the advantages and disadvantages of this approach before taking any action, he said.

McCann added: ‘’Before the inheritance tax proposals were announced, the approach of many farmers was to gradually hand over more of the day-to-day management to the younger generation while holding onto the ownership of the assets until a later date.

“The new rules will prompt many to pass on the assets at an earlier stage, because if they live seven years [after giving the gift], they would normally be free of inheritance tax.

‘’For that to work it’s important that the farmer doesn’t continue to benefit from the assets they give away. If they intend to continue in the business, they’ll need to pay a market rent to the new owner or if in partnership with them, reduce their profit share to reflect the new ownership.’’

The number of probate cases taking almost two years to be finalised has more than doubled since 2020/21, according to Freedom of Information data from the Ministry of Justice.

In a significant worsening of delays, the share of probate cases taking between 21 and 23 months to be granted has risen by 131% (from 88 to 203) in the past five years.

The biggest increase in the length of time taken to grant probate was in the category of people waiting ‘over a year’ for the process to be completed, which was up by 171% since 2020/21. There were 737 cases waiting this long at the time, compared to 2,040 in 2024/25.

Financial experts are warning the situation is likely to worsen further when pensions are brought into the scope of inheritance tax (IHT) from April 2027. They are urging people to take action now to reduce complexity for those left behind and avoid probate disputes and delays.

Ian Futcher, financial planner at wealth manager Quilter, which obtained the FOI data, said: “A growing number of families are now waiting well over a year, and in some cases nearly two years, for probate to be granted. That creates real stress for executors and beneficiaries alike.”

With pensions set to become part of the taxable estate, there is a real risk that these delays become even more entrenched, he added. “Executors may need to track down information across multiple pension schemes, confirm valuations and deal with additional tax reporting, all while the clock is ticking on inheritance tax.”

We look at how to navigate the maze of inheritance tax paperwork in a separate article.

What is probate?

Probate is the legal right to deal with someone's estate (such as their property, money and possessions) when they die and to distribute it according to their will, or the law if there is no will.

Typically, before the next of kin or executor named in the will can claim, transfer, sell or distribute any of the deceased's assets, they have to apply for a grant of probate.

However, Freedom of Information data, obtained from the Ministry of Justice by wealth manager Quilter, showed a significant increase in delays with the process – leaving families waiting months or even years to access estates.

Without access to the money in the estate, it is often not possible to fully pay inheritance tax bills, which are due within six months of the deceased person dying, though in a catch-22 situation probate won’t typically be granted until HMRC has been sent at least partial payment for IHT.

In 2024/25 alone, around one in eight estates took longer than six months to clear probate, increasing the risk of interest accruing on inheritance tax where it was due.

How long should probate take?

According to government guidance, a grant of probate should typically be issued within 16 weeks of submitting an application.

However, the data showed a growing proportion of estates waiting well beyond this timeframe, with a sharp rise in cases taking more than a year and a notable increase in those waiting nearly two years.

Delays in probate can prevent executors from accessing bank accounts, selling property or managing investments, leaving estates frozen at a time when families may already be under financial and emotional strain.

Where inheritance tax is due, HMRC can charge interest on unpaid tax from six months after death, meaning prolonged probate can translate into higher tax bills even where delays are outside the family’s control.

How to reduce risk of probate delays

Futcher, from Quilter, said one of the most effective ways to reduce the burden on executors is to treat the start of the new tax year as a time to do a financial MOT – spring‑cleaning your finances while you’re alive can significantly ease delays later on.

“That might include consolidating old pensions or ISAs, keeping a clear record of accounts and providers, ensuring beneficiary nominations are up to date, and putting powers of attorney in place,” he said.

“Given how stretched the probate system already is, anything people can do now to reduce complexity will help their executors navigate the process more quickly, avoid unnecessary costs and reduce stress at an already difficult time,” he added.

A Ministry of Justice spokesperson said the department has worked hard to reduce waiting times for probate applicants, including through staff training and improving how applications are processed, which has resulted in record numbers of grants being issued over the last year.

They added: “Most probate applications are now granted within five weeks, down two weeks on a year earlier – but we understand how distressing delays can be in some cases.

“Applicants who feel their cases are not progressing can request an appointment with the probate team.”

A new tax year may have only just started but it is already worth getting ready for April 2027 as savers and investors will be hit with even more tax grabs.

Several new tax changes have been brought in since the start of the 2026/27 tax year including higher dividend rates, and while the focus may be on making use of reliefs and allowances over the next 12 months, a bigger shake-up is coming in April 2027.

From the start of the next tax year, pensions will be included as part of estate calculations for inheritance tax, the cash ISA allowance will be restricted to £12,000 per year for under 65s and tax rates on savings interest and property income will be hiked.

April 2027 may seem a long way away but there are benefits to preparing now.

Antonia Medlicott, founder of Investing Insiders, said: “The next wave of tax changes risks catching many people off guard, particularly around pensions and ISAs.

"Overall, the key is to review plans now rather than react later, checking balances across pensions, ISAs and taxable accounts, and making full use of allowances while they last.”

1. Pension inheritance tax changes

Currently, pensions fall outside a person’s estate when making inheritance tax calculations.

This makes it easier to pass on wealth but from April 2027, unused retirement savings will be counted in the value of an estate, which could tip the total above the £325,000 inheritance tax threshold.

Jason Hollands, managing director of Evelyn Partners, said: “Historically, pensions have been highly attractive from an estate planning perspective. Individuals with sufficient alternative resources have often chosen to preserve pension wealth for as long as possible, using it as a tax-efficient vehicle for passing assets to the next generation.

"From April 2027, this long-standing approach may need to be reconsidered.

“Anyone whose estate is likely to fall within the scope of IHT should review their position carefully and seek professional advice. Importantly, pensions should no longer be viewed in isolation, but as part of a broader, integrated estate planning strategy.”

Options include taking more from your pension while you can and making use of gifting allowances to ensure more money goes towards you and your loved ones rather than the taxman.

Hollands suggested the changes also underline the importance of diversification across different tax wrappers.

He said: “While pensions remain valuable, it may be increasingly important not to rely on them exclusively. ISAs continue to play a central role, and for some investors, offshore bonds may offer additional flexibility.

“These can be reassigned – to a spouse, adult children or into trust – without triggering an immediate tax charge, although tax may arise on eventual encashment. When combined with trust planning, they can help move future growth outside the estate, subject to the usual rules.”

Shaun Moore, tax and financial planning expert at Quilter, warned there are also practical consequences.

He said: “As pensions become part of the estate, probate is likely to become more complex and time‑consuming.

"Many households may want to respond by consolidating accounts, updating wills and putting lasting powers of attorney in place. These are not tax strategies, but they can make a meaningful difference for families later on, when simplicity and clarity matter most.”

2. Reduced cash ISA allowance

In an effort to encourage more people to invest, the cash ISA allowance will be restricted to £12,000 from April 2027 for people under the age of 65.

That means this is the last tax year where those affected can use the full £20,000 ISA allowance entirely on cash ISAs.

From next April, only up to £12,000 of the £20,000 can be put in a cash ISA but the full amount can still be put to work on the stock market via a stocks and shares ISA.

This will fundamentally change how many people use cash ISAs, Moore suggested.

He added: “With only £12,000 available, younger savers who want to make full use of the £20,000 allowance will be pushed towards stocks and shares ISAs. That raises the importance of understanding risk and time horizons, particularly for those who have relied on cash as a default rather than a choice.”

Medlicott added that using current allowances while they remain available has become more important.

She said: “Savers should also reassess whether cash ISAs are still suitable for longer-term money, or whether a mix with stocks and shares ISAs offers better flexibility."

3. Higher property and savings tax rates

Income tax rates for savings and property income are set to rise from 6 April 2027 by two percentage points.

This means the basic rate will increase from 20% to 22%, the higher rate will increase from 40% to 42% and the additional rate will increase from 45% to 47%.

That means savers need to monitor the amount of interest they are earning and consider using ISAs.

Hollands said the changes create another headache for landlords who will pay more tax on rental income after already being hit with the Renters’ Rights Act reforms and higher stamp duty costs.

Hollands said: “Planning options in this area are more limited but may still be worth exploring. One approach is to transfer ownership between spouses so that rental income is taxed at a lower marginal rate. Another is to consider holding property within a corporate structure, where profits are subject to corporation tax (currently up to 25%) rather than income tax.

“However, incorporation is not straightforward and can trigger both capital gains tax and stamp duty, so it is generally only suitable in specific circumstances – typically for those with larger portfolios and a long-term investment horizon.”

The number of people taking their tax-free pension lump sums as early as they can has hit a five year high, according to a Freedom of Information (FOI) request to HMRC.

Currently the earliest you can take your pension tax-free lump sum is age 55 (rising to 57 in April 2028). As many as 116,000 Brits aged 55 years old opted to do this in 2024/25, the FOI data, as they rushed to beat incoming inheritance tax (IHT) rule changes.

This is up from 110,000 in 2023/24, and marks a five year high for the earliest possible withdrawals of the pension tax-free lump sum.

The total value withdrawn by those aged 55 also reached a five-year high of £2.3bn in 2024/25, up from £2.1bn the previous year.

Inheritance tax pension rule change

More people have been taking lump sum withdrawals from their pensions following the announcement in the 2024 Autumn Budget that unused pensions will face inheritance tax of up to 40% from April 2027, said Andrew Tricker, chartered financial planner at Lubbock Fine Wealth Management, which submitted the FOI.

Tricker said: “As pensions will be dragged into the inheritance tax net, many are rushing to take money out as soon as they can to help mitigate what they see as excessive tax bills for their dependents.”

“What is surprising is that this trend has spread to people who have decades left based on average life expectancy.

Based on 2022 to 2024 Office for National Statistics data, life expectancy at birth in the UK is around 83 years for women and 79.1 years for men. Life expectancy at age 65 is around 21.2 years for women and 18.7 years for men.

But despite the risks of outliving their pensions, the number of people withdrawing money from their pot early is likely to rise further as the new IHT changes draw closer, said Nicholas Clark, chartered financial planner at Lubbock Fine.

Clark said: “As we get closer to the deadline, more people will tap into their pension pots – particularly those who can do so without creating a big tax liability.

“Pensions were widely seen as highly ‘tax-efficient’, so many people built and preserved very large pots to pass on wealth to their loved ones free of IHT. Some of them have now started to change course, often without fully thinking it through.”

Some are choosing to pass these funds on to their families during their lifetime to reduce IHT bills, added Clark.

Gifts made more than seven years before death generally fall outside inheritance tax, known as the seven year inheritance tax rule.

Pension withdrawal warning

But over-55s are being warned to avoid making decisions to transfer funds elsewhere without proper planning, as money withdrawn from a pension is difficult to put back.

Tricker said: “It is worrying that more people are tapping their pension pots so long before the usual retirement age. Some are taking too much, too soon. Without careful planning, they could find themselves short of money in retirement.”

“People are living longer, and health and care costs are very unpredictable in retirement. That is why retirees need a financial buffer. Income is much harder to increase once you stop working.”

In many cases, it can make sense to keep money within the pension, shop around for the best draw down provider, and draw it down gradually. Being able to review retirement income over time and adjust as needed is one of the main benefits of the pension freedoms introduced in 2015.

“Keeping funds within the pension also allows people to make greater use of the ‘gifts out of surplus income’ exemption. Income drawn from a pension can qualify as surplus income, meaning it can be passed on to loved ones without triggering an inheritance tax bill,” Clark pointed out.

A spokesperson for HM Treasury said: “We continue to incentivise pension savings for their intended purpose of funding retirement instead of being openly used as a vehicle to transfer wealth – more than 90% of estates each year will continue to pay no inheritance tax after these and other changes.”

The introduction of a scheme to protect the National Insurance records of people, mainly mothers, who might otherwise lose out when it comes to their state pension has been delayed, the government has announced today (30 March).

The delay has been condemned as “deeply frustrating” by Steve Webb, a former pension minister and now partner at pension consultancy LCP.

The issue relates to the impact of the introduction of the High Income Child Benefit Charge (HICBC) in 2013, which aims to claw back Child Benefit from higher earners. Parents – mostly mothers – can still claim Child Benefit, regardless of the charge, but if they or a partner has an individual income above the threshold, they face a tax bill which may wipe out the value of the Child Benefit.

After HICBC was introduced, hundreds of thousands of parents reacted by simply not claiming the benefit.

However this created a new problem – not claiming Child Benefit also meant not getting a valuable ‘National Insurance credit’ for anyone with a child under 12. These credits help to protect the state pension record of those who are at home raising children.

Another problem was that although parents who later realised they might miss out could make a Child Benefit claim (but ask for the National Insurance credits and not the cash benefit), such claims could only be backdated for three months. This meant they could still have years missing on their National Insurance record.

To sort out the issue, in April 2023 the Conservative government under then prime minister Rishi Sunak promised to create a system where parents in this position could be awarded ‘replacement credits’. This system was due to come into force from April 2026.

However the government has announced a delay of one year in the introduction of this scheme, which is now due to open in April 2027.

Who will be affected by the delay to the “replacement credits” system?

Those who won’t reach state pension age until after April 2027 should not be affected – provided they had not inadvertently paid voluntary National Insurance contributions for the ‘missing’ years.

But, Webb pointed out, the delay will be especially frustrating for those who have already reached state pension age or will do so shortly, and may get less in state pension than they are due. In response, HMRC has said people who have lost out, in terms of reduced state pension, may be able to claim financial assistance.

Webb from LCP said: “It is deeply frustrating to see a delay in a scheme designed to unpick a mess in the pension system. When the High Income Child Benefit Charge was introduced in 2013, some parents – mostly mothers – decided it wasn’t worth bothering to claim Child Benefit, only for them or a partner to get a tax bill for the same amount. But by not claiming Child Benefit they also threw away valuable National Insurance credits towards the state pension.

“The government promised several years ago to fix this problem by creating ‘replacement credits’, but now we hear – just a few weeks before the new system was about to be introduced – that it has been delayed by a year. The whole thing has been a mess from the start.”

An HMRC spokesperson told MoneyWeek: “We can reassure parents and carers that when the service launches in April 2027, they will still be able to claim credits going back to January 2013, meaning no one will miss out on them.

“Because those who benefit from the service will be families with children under the age of 12 since 2013, we expect very few to have reached state pension age by this April.”

What are the current High Income Child Benefit Charge rules?

Since 2024/25, if you or your partner earn more than £60,000 per year, you will be affected by the High Income Child Benefit Charge. You’ll pay 1% of the Child Benefit back for every £200 you earn over the threshold.

This means if you or your partner earns £80,000 or more, you’ll repay all of the Child Benefit through the tax. Affected parents can opt out of Child Benefit payments. This means you are still registered for Child Benefit but don't get paid the money – letting you avoid having to pay the tax charge but still receive National Insurance credits.

Previously, if you or your partner earned more than £50,000 per year, you'd have to pay some of your Child Benefit back. It would be lost entirely to the tax if you or your partner's income was £60,000 or more.

Could taking out life insurance help ease the worsening headache of inheritance tax (IHT) facing hundreds of thousands of families in the UK?

It could certainly help, say financial advisers, but that advice comes with a string of caveats – including a warning that you could end up paying out more in total premiums than the tax bill your family eventually ends up with.

Certainly, sales of whole-of-life insurance policies – the type of cover best-suited to inheritance-tax planning – are booming. Britons spent 18% more on premiums on such policies last year than the previous year, reflecting a growing concern that a tax once paid only by a wealthy minority is rapidly becoming an issue for middle-class families who don't regard themselves as especially affluent.

The government says very few families currently pay inheritance tax. That's true – in 2022-2023, the most recent tax year for which figures are available, fewer than 5% of deaths resulted in an inheritance-tax charge. Just 31,500 families faced a bill. But the numbers are set to rise quickly. The government's own projections suggest 10% of deaths will trigger an inheritance-tax liability by the 2029-2030 tax year; in other words, the number of families paying the tax is expected to more than double within just seven years. The official forecast is that inheritance tax receipts will rise to £14.5 billion by 2030-2031, 67% more than the Treasury expects to net in the current financial year.

This trend is well under way, says Shaun Moore, a tax and financial planning expert at wealth management firm Quilter. “IHT receipts for the 2025-2026 tax year reached £7.7 billion by the end of February, surpassing the 2023-2024 total of just under £7.5 billion with a month still to go,” he says. “IHT is certainly no longer a tax aimed only at the mega wealthy.”

There are a couple of reasons for this. First, the inheritance-tax threshold – the size of estate at which the tax becomes payable – has now been frozen since April 2009. The then Conservative government did introduce an additional “residence nil-rate band” in 2017, providing extra headroom against the value of the family home, but this has also been frozen at £175,000 ever since. The current government has said these freezes will remain in place until at least April 2031. This inevitably drags more people into the inheritance-tax net as household incomes and asset prices rise. The average value of a house, for example, has risen by more than 70% since April 2009.

In addition, the current government has added to the list of assets that count towards the value of your estate for inheritance tax purposes. Most significantly, from April 2027, any private pension savings you hold in defined-contribution schemes that are remaining at the time of your death will count towards your estate. Currently, most pension assets are exempt from inheritance tax.

The government is cutting some of the inheritance-tax reliefs available to families. Its plans include a cap on the 100% business or agricultural relief applied when bequeathing businesses or farms – from 6 April, you will only be able to pass on assets worth up £2.5 million free from tax per person; above this threshold, inheritance tax will apply at 50%. However a couple will still be able to pass on £5 million assets between them.

Taking out life insurance is becoming increasingly popular

Against this backdrop, many more families are rightly concerned they will one day face an inheritance-tax bill – and potentially a significant charge. That is prompting more families to plan ahead, with strategies such as taking out life insurance becoming increasingly popular. “As the screw is being turned on reliefs and exemptions, more families and their advisers are now reaching for the security of insuring against the IHT liability,” says Ian Dyall, head of estate planning at wealth-management firm Evelyn Partners.

It's a relatively simple concept. The idea is to work out how much inheritance tax your family is eventually likely to be liable for, and then to take out a life-insurance policy that will pay out enough to meet this bill. The most common – and simplest – type of life cover is term assurance, which pays out a fixed sum if you die during the term of the policy. However, this won't work for an inheritance-tax liability, since you can't be sure when you will die – if you live beyond the term of the policy, there won't be a pay-out. Instead, you typically need whole-of-life cover: as long as you continue to pay the premiums, these policies will pay out whenever you die.

It's also important that the policy is written inside a trust, a legal structure that ensures the proceeds of the insurance fall outside your estate. Otherwise, your family may face an additional inheritance-tax liability courtesy of the insurance pay-out. Most advisers and insurers will be able to help you structure the cover in this way, though there may be fees to pay for this service.

So far, so good, but there are issues with whole-of-life cover. First, it's important to understand what the cover will cost you – both today and in the future. Insurers calculate premiums according to factors such as your age, health and the size of the policy, and you may have to undergo a medical examination. The cover comes in two forms: reviewable, where the insurer has the right to increase your premiums over time, and guaranteed, where the premium you start with will never change. The latter tends to be more expensive at the outset, but gives you certainty that premiums will remain affordable for as long as you need the cover.

Whole-of-life premiums can be costly. Evelyn Partners says that for a healthy 50-year-old client seeking guaranteed cover of £1.4 million, the monthly premium would be roughly £1,250. Such a client would have to live until the age of 143 to have paid out more in premiums than the value of the insurance pay-out, but these are still sizeable monthly payments. Moreover, for older policyholders, the cost will be higher, particularly as health deteriorates, and some people may even struggle to secure cover. In some cases, total premiums paid will exceed the payout insured much sooner. For this reason, advisers often suggest taking out life insurance when you're younger – in your 50s or 60s, say.

“We'd look at whole-of-life insurance as a young person's game, comparatively,” says Tom Mullard, business director for tax services at TIME Investments. “If you get guaranteed premiums, you know what you're paying, and you may even have investments generating returns from which you can pay the premiums so that you're not really seeing a decrease in your capital.” This does mean it's likely you'll be paying the premiums for longer, but the good news, adds Dyall, is that costs could fall. “Prices appear stable and, in some instances, are even coming down as providers compete for market share in the growing market.”

Is it better to save the money instead?

Still, some question whether whole-of-life insurance offers good value, particularly for policyholders in good health with many decades of life ahead of them. And once you've signed up for a policy, changing course by cancelling the cover will mean you've wasted the money spent so far. James Baxter, founder of financial planning firm Tideway Wealth, says it makes sense to think of a such policies as more like a savings plan than an insurance contract. You're effectively putting money aside each month so that eventually there is enough to pay a bill. “People should ensure that they understand these policies before signing as it could cost them more than they realise,” Baxter argues. “If a couple take out a policy aged 64 and one of them lives beyond 90, the effective return drops below risk-free rates, making the policy a less attractive savings vehicle.”

What he means is that by the time you get into your 90s, you'll have paid so much out in premiums that the sum your beneficiaries will get back represents a negligible – or even negative – return on the money. You'd have been better off putting the same amount of money into a risk-free bank or building society savings account each month. The counter to this argument is that funding an IHT liability through regular savings would not provide the certainty that many families want and need. You can't be sure you'll live long enough to put enough money by to settle the bill. Nevertheless, if you are going to go down the insurance route, it's vital to keep costs down. Shopping around will help –an independent broker can provide valuable help here – but it's also important not to think of insurance as a silver bullet for IHT planning.

Importantly, the more you can do to reduce your family's IHT liability, the less insurance you'll need to take out. That means ensuring you take full advantage of other IHT planning opportunities. “Life cover does not replace good planning – it supports it by dealing with the elements that planning cannot fully remove and by creating certainty,” adds Lyall. “The better the underlying planning, the smaller the amount of life cover required and the more manageable the premiums become.”

Make full use of gifts to reduce inheritance tax

Certainly, it's important to make full use of your gifting allowances to reduce the size of your estate. You can make gifts of up to £3,000 each year with no liability for tax, as well as many smaller gifts worth no more than £250 per person. Gifts of any size to charity are also exempt from tax and there are additional allowances for gifts for a family member's wedding or civil partnership. Gifts from income can also work well. If you can show that your regular monthly income exceeds what you need, you can give away as much of the excess as you like with no tax consequences.

In addition, consider making potentially exempt transfers – these are gifts that will fall out of the value of your estate for tax-planning purposes as long as you live for at least seven years after making them. You can even insure for the possibility of not living that long (see below).

Beyond gifting, professional advisers can help you with other IHT planning strategies, from the use of investment vehicles such as the enterprise investment scheme (EIS) to maximising business relief. “The bigger point is that planning has to start earlier,” adds Mullard. “It can be hard to justify thinking about these issues when you may have 40 years of life left ahead of you, but it will make it easier to come up with a holistic solution.”

Some nuances to consider

While whole-of-life cover may be ideal for insuring against your family's eventual inheritance tax (IHT) liability, term assurance could help you address a more immediate issue. Giving away large sums or valuable assets will reduce the value of your estate for IHT purposes – and therefore cut your family's bill – but these potentially exempt transfers only drop out of the IHT net seven years after you make them. In which case, a term assurance policy could provide cover against you dying sooner than expected and triggering a tax liability. The idea is to take out the insurance you need only for a set period – until your gift becomes fully exempt from IHT. This will usually be much more affordable than whole-of-life cover.

One nuance to consider here is whether your gift is eligible for taper relief, which could apply if you die with seven years of making it. After three years, many gifts qualify for this, with the rate of IHT payable falling from 32% at three to four years, to 8% at six to seven years. If so, you can take out a “decreasing term assurance” policy, which pays out a reducing amount over the term of the policy, and therefore costs less. Taper relief only applies if the total value of the gifts you make before you die exceeds the £325,000 tax-free IHT threshold.

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The end of the 2025/26 tax year is nearly here, with just weeks left before annual tax-free allowances reset. Some of these tax breaks will be lost forever if you don’t use them this tax year.

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HMRC is dramatically increasing enforcement on digital assets, including on those who may not realise they owe any tax at all.

Crypto’s pseudo-anonymous and complex nature means many people do not pay the right tax on holdings. UK government estimates suggest non-compliance with the tax rules could range from 55% to as high as 95% among crypto asset investors.

Many investors are likely to be unintentionally underpaying taxes on their crypto assets, especially capital gains tax (CGT), but nevertheless risk penalties and surprise tax bills.

We look at ways to reduce your capital gains tax bill in a separate article.

HMRC crypto crackdown

HMRC is increasingly intervening to claw back the tax it is owed. It sent as many as 101,024 CGT warning or ‘nudge’ letters to investors in crypto assets between 2020 and 2025, according to new Freedom of Information (FOI) data obtained from HMRC by comparison platform BrokerChooser.

This is more than 40 times the amount issued for shares and securities (2,358), suggesting crypto investors are now HMRC’s largest capital gains tax compliance target, far overtaking traditional assets such as stocks and property.

The number of crypto-related nudge letters HMRC sent more than tripled between 2021/22 (8,329) and 2023/24 (27,712), before soaring to 64,982 letters in 2024/25, an increase of 680% in just three to four years.

Over 560 times more letters were sent regarding crypto than traditional share disposals in the financial year 2023/24, with just 49 letters issued for shares and securities compared to 27,713 crypto letters.

Adam Nasli, head broker analyst at BrokerChooser, said: “To ensure you stay tax-compliant in 2026, we urge investors to keep detailed records of all purchases, sales, swaps, transfers and payments made using cryptocurrency.

“Many investors assume small trades don’t count, but even simple swaps can trigger tax liabilities. Investors must review official guidance or seek professional advice to ensure gains are reported correctly.

“If you think you may have underreported crypto gains, we recommend using HMRC’s voluntary disclosure service to reduce penalties. By proactively disclosing errors, you can reduce penalties for careless mistakes to as low as 0% and for deliberate actions to between 20% and 70%.”

Confusion on crypto asset tax rules

While crypto enforcement has soared in 2024/25, it remains likely that many letters may have been issued for unintentional non-compliance.

Confusion around crypto tax rules is widespread. When HMRC published its research report on the uptake and understanding of crypto assets in the UK in 2022, only 50% were aware tax liabilities can arise when converting crypto assets into fiat currency like pounds sterling.

Only 28% had seen HMRC's guidance on the tax treatment of crypto assets, and only 16% had sought tax advice in respect of their crypto assets. Capital gains tax is the principal tax that will likely apply to individual investments in crypto assets, but 59% of crypto asset owners said they know little or nothing about CGT.

But while there may be honest mistakes, HMRC can still impose penalties if you did not take “reasonable care” to check your tax liability.

How crypto investors can reduce their tax penalty risk in 2026

To avoid a surprise tax penalty for non-compliance with the rules, crypto investors are being urged to ‘TRACK’ their investments in 2026:

1. Track every crypto transaction

2. Remember that token swaps can trigger tax

3. Account for everyday crypto use

4. Check HMRC guidance

5. Keep mistakes transparent

MoneyWeek has contacted HMRC asking for comment.

Wealthy expats who moved to Dubai to escape the UK’s rising taxes are being warned about the fiscal implications of returning amid the Iran war.

Location such as Dubai have attracted wealthy households in recent years amid frozen thresholds and tax allowances in the UK, which have caused fiscal drag.

Many expats who moved to Dubai are now reported to be returning to the UK amid the escalating tensions in the Gulf region.

But they could land themselves with an unexpected tax bill.

Accountancy firm Price Bailey has warned people who recently moved to Dubai may inadvertently fall foul of the UK’s five‑year temporary non‑residency rule.

This is an anti‑avoidance measure designed to stop individuals leaving the UK briefly to dispose of assets tax‑free in low‑tax jurisdictions such as the United Arab Emirates (UAE) before returning soon after.

Nikita Cooper, director at Price Bailey, said: “The immediate focus is usually on income, which is taxed as it’s earned, but the far bigger issue is capital gains tax (CGT), which is often overlooked.

“Someone returning to the UK from Dubai for a short period may face some income tax, but that is manageable, unlike a large one‑off CGT bill.”

The tax risks of returning to the UK

The big risk for those returning to the UK from Dubai after a short period is CGT.

Under HMRC’s temporary non-residences rules, if an individual becomes UK‑resident again within five full tax years, capital gains realised while abroad are effectively “brought back” into the UK tax net and taxed in the year of return in certain circumstances.

Price Bailey adds that the same CGT trap affects individuals in the UK who were preparing to emigrate to Dubai and are in the advanced stages of selling businesses or second non-UK homes, but who are now hesitant to leave due to safety concerns.

Price Bailey said returning to the UK increases an individual’s “day count” under the Statutory Residence Test (SRT).

If this results in UK residency being triggered before five full tax years have elapsed, the temporary non‑residence rules can apply.

Cooper added: “What catches people out is that if they return within five years, gains on assets held before departure and sold while in Dubai are effectively ‘revived’ and taxed in the year of return. It’s the retrospective nature of the rules that tends to surprise people.”

This means people who may have sold UK businesses or second non-UK homes while tax‑resident in Dubai could now face paying CGT at 24%. For many, that could amount to tens or even hundreds of thousands of pounds.”

Price Bailey said it is aware of clients who were planning to emigrate to Dubai but have now paused the sale of businesses and second homes while they reassess their options.

Another risk is the UK’s Statutory Residence Test (SRT), which determines whether someone is classed as a UK tax resident. This may be an issue if flights are unable to return to Dubai or other parts of the United Arab Emirates.

Anyone who spends 183 days or more in the UK during a tax year automatically becomes a UK tax resident. But there are key caveats.

Below the 183-day threshold, residency depends on both the number of days spent in the UK and an individual’s ”ties” to the country.

Wealth manager Evelyn Partners has warned that someone who has previously lived in the UK, tax residency can potentially be triggered with as few as 90 to 120 days in the country if they maintain multiple ties, which is common.

How expats can minimise their tax bill when returning to the UK

The bad news for returning expats is that there isn’t much they can do about reducing their tax bill if they only recently left the UK.

However, HMRC is reportedly examining whether tax concessions could be introduced for Britons forced to return due to instability in the Middle East.

HMRC can disregard up to 60 days spent in the UK due to “exceptional circumstances,” but accountants have warned that this relief is unlikely to apply for those coming back from Dubai because individuals can travel to alternative destinations.

A key uncertainty is official travel advice.

David Little, financial planning partner at Evelyn Partners said the exceptional circumstances rule has historically been applied when the Foreign, Commonwealth and Development Office advises citizens to “avoid all travel”.

He said: "The UAE currently sits at the lower warning level of “all but essential travel”. Crucially, these are not equivalent.

"This distinction leaves significant ambiguity over whether evacuations or safety-related returns from the UAE would qualify for relief under the exceptional circumstances provision."

When it comes to the UK statutory residence test, Amal Shah, tax partner at accountancy and advisory firm Gerald Edelman, said the biggest risk for individuals is slipping up on their day count.

Shah said: “If you breach the limits you can very easily end up being treated as UK‑resident for the whole tax year, even if that wasn’t your intention.

“Once you fall back into UK residence, you also need to be mindful of the Temporary Non‑Residence (TNR) rules. These rules are deliberately tough.

“If you return to the UK within the relevant timeframe, any income or gains you realised while you were non‑resident, can be pulled back into charge.

“That can cover a wide range of things, from asset disposals to certain distributions or pension withdrawals, so the impact can be significant.

“A common misconception is around exceptional circumstances. HMRC takes an extremely narrow view of what counts. Simply leaving another country because of a situation there and returning to the UK won’t normally qualify.

“In HMRC’s eyes, exceptional circumstances only really apply when you are already in the UK, and something genuinely outside your control prevents you from leaving. That’s a very high bar, and HMRC sticks to it.”

Little adds that expats returning to the UK may qualify for split-year treatment. Normally, a person is either resident or non-resident for a full tax year.

But if someone leaves or returns partway through the year, the tax year can be divided into a “UK resident portion” and an “overseas portion”, potentially keeping foreign income outside the UK tax net.

Split-year treatment is not automatic though and must be claimed through self assessment.

Little added: "Until HMRC issues any clarification, expats considering temporary returns should carefully monitor their UK days and ties, plan travel around thresholds, and file appropriate forms to claim split-year treatment where relevant. As always, seek professional advice.

"Small changes in travel behaviour can be the difference between remaining outside the UK tax net and falling fully within it, a situation often reduced to a ‘health versus wealth’ dilemma, with no easy outcome."

A spokesperson for HMRC said: “The existing rules already take into account exceptional circumstance, such as people being affected by war, while following the basic principle that those living in the UK should pay tax in the UK.”

Increasing numbers of homes are pushing families into paying inheritance tax.

A combination of rising house prices and tax thresholds pushing more estates into the inheritance tax trap – an issue affecting all parts of the UK.

Research by law firms Shakespeare Martineau, Mayo Wynne Baxter and Lime Solicitors found that a home purchased in 2025 is now three times more likely to expose a family to inheritance tax than in 2009.

Analysis of Land Registry data reveals that in 2009, just 13% of all property purchases in England and Wales or 83,266 of 625,205 were at or above the £325,000 inheritance tax threshold. By 2025, that proportion had surged to 41% or 281,734 of 681,054.

It comes as the £325,000 nil-rate band has remained frozen since 2009 and is set to stay at that level until at least 2031.

Even the main residence nil-rate band threshold £175,000, which technically pushes the inheritance tax allowance to £500,000, is of little help to many homeowners.

The number of homes purchased for £500,000 or more has also more than trebled over the same period from 5% in 2009 to 18% in 2025.

The regions with the highest proportion of homes in the inheritance tax net

Perhaps unsurprisingly, London has the highest proportion of homes that could be liable for inheritance tax. The majority (84%) sold for more than £325,000 in 2025, while 52% sold for more than £500,000. The proportion is up from 35% and 15% in 2009 respectively.

But it is not just London and the South East where high value homes could push up inheritance tax bills.

Wales has seen the proportion of homes sales above £325,000 soar from 4% to 20% between 2009 and 2025, while the East of England has seen £500,000 home sales rise from 4% to 22%.

Fiona Dodd, private client partner at Mayo Wynne Baxter, said: “When modern inheritance tax – originally introduced as estate duty in the late-1800s – was created, it was designed to apply only to the very wealthy.

“However, with the tax-free allowance frozen for almost two decades, rising property prices have steadily drawn more families into the scope.

“Many people assume inheritance tax will never affect them. But as our analysis shows, a growing proportion of homes now approach or exceed the £325,000 threshold – before savings, investments or personal possessions are even considered.

“With inheritance tax charged at 40% above the threshold, families can be left facing a substantial and unexpected bill at an already difficult time.”

This is even before homeowners consider the value of their pension, which will be included in inheritance tax calculations from April 2027.

How to reduce your inheritance tax bill

There are steps you can take to reduce your inheritance tax bill such as gifting while still alive and leaving assets to your spouse, which would be tax-free.

Andrew Wilkinson, head of inheritance disputes at Lime Solicitors, said: “With estates growing in value, pensions becoming subject to inheritance tax and the threshold remaining static, there is simply more at stake – financially and emotionally.

“Tax-efficient decisions, such as leaving larger proportions to charity or to a spouse or civil partner, can unintentionally create tension in blended families or among dependants who expected a different outcome.

“We are likely to see more disputes as families grapple with the competing pressures of tax efficiency and fairness.

“The best protection against future disputes is careful, professional advice and open, honest communication within families. Many of the cases we see stem from a lack of clarity and unexpected provisions in a will.”

Growing evidence is suggesting pensioners with larger defined contribution pension pots are starting to run them down much faster – or use them up in full – in a bid to reduce potential inheritance tax (IHT) liabilities.

From April 2027, unspent defined contribution pension pots will be added to the value of the estate when inheritance tax is worked out. Likewise certain defined benefit death benefits such as ‘death in deferment’ lump sums. The changes were announced in the 2024 Budget.

The government estimates the move will bring around 10,000 estates each year into paying inheritance tax for the first time as well as increasing IHT bills for a further 40,000 estates.

But the long gap between the announcement of the change and it being implemented has given wealthy pension savers and their financial advisers time to put in place a range of strategies to offset the impact of the move.

This impact is most likely to be seen with larger pot sizes where the inheritance tax risk is greatest.

Steve Webb, partner at pension consultants LCP and a former pensions minister, said: “For many years, one of the attractions of defined contribution pensions has been their favourable treatment under inheritance tax rules, especially for those with larger pots.

“But the 2024 Budget announcement has changed things, and people with larger pots are now exploring a range of strategies to reduce any potential IHT bill for their heirs.”

What are pension savers doing to avoid inheritance tax?

Pension savers are increasingly turning to two financial products – annuities and whole of life insurance policies – to help them overcome the fact pensions will be subject to inheritance tax from April 2027, Webb says.

Annuities

Annuities allow savers to convert some or all of their defined contribution pot into a lifetime income stream. This income can be potentially gifted using the “normal expenditure from income” exemption.

Provided the rules are followed, these gifts can immediately be exempt from IHT.

If a joint life annuity is bought, then this carries on after the death of the first person. This is free from inheritance tax for the second life, even if the couple aren’t married or in a civil partnership.

There has recently been a surge in annuity purchases bought with larger pension pots. Sales of annuities over £250,000 rose by 31% year-on-year in 2025, and sales of annuities valued at over £500,000 rose by 54%, according to data from the Association of British Insurers (ABI).

In the case of an annuity, those in poorer health will generally get a better rate, as the annuity will pay out for a shorter period.

Whole of life policies

With ‘whole of life’ insurance policies, savers can pay for regular premiums for a policy which pays out a guaranteed lump sum when the saver dies. These payouts are free of inheritance tax, provided the policy is set up under a trust.

Alternatively, this lump sum could pay for any inheritance tax bill.

In the case of a couple, the policy can be set up to pay out on the ‘second’ death, meaning that it pays out only at the point the estate passes between generations. This reduces the cost of the policy. Doing it this way is known as a ‘joint life, second death’ policy, and typically applies for deaths up to age 90.

Industry sources suggest a surge in demand for whole of life policies, with an increase of 92% year on year reported in Spring 2025.

The terms for whole of life policies will generally be better for those in good health, because the premiums will run for longer and the expected payout date will be later.

Webb said: “Defined contribution pension providers can expect to see changing behaviour amongst savers with the largest pots, with more interest in drawing down more rapidly for gifting or purchase of a whole-of-life policy, or even using the whole pot for annuity purchase. Providers may find that the largest pots disappear the quickest post-retirement.”

Annuity or whole of life policy – which is best to avoid inheritance tax?

Financial advisers will be able to recommend the right strategy for each individual, but according to Webb, factors which pension savers are likely to consider if deciding between an annuity or a whole of life policy include:

Timing: With the annuity option, the pension saver is ‘giving while living’ – passing on regular income immediately to heirs. By comparison, a ‘whole of life’ policy delivers a lump sum on death.

Health: Those in poor health could potentially get favourable annuity terms, though risk giving up their capital for a relatively limited payout period. Meanwhile those in good health could get favourable terms from a whole of life policy, especially one which only paid out on the ‘second death’ in a couple.

Adjusting for inflation: Whole of life premiums can be fixed in cash terms, providing assurance the policyholder can keep up the payments for life, or can be set to increase, thereby helping to maintain the real value of the eventual payout.

With both a whole of life policy and an annuity, the policyholder will need to keep records so their heirs can demonstrate ‘where the money went’ while the saver was alive, to ensure HMRC do not attempt to add the money gifted (or spent on premiums) back into the estate after death.

Clare Moffat, pensions and tax expert at Royal London, said: “It is clear that there is growing interest for clients who might be affected by IHT in financial products such as annuities or whole of life policies. But the options are complex and it may be worth an inheritance tax bill if that makes family members better off.

“Most people would benefit from taking professional financial advice so they can work out the best course of action for their specific circumstances.”

We look at how to navigate the inheritance tax paperwork maze in nine clear steps in a separate article.

It was better news on tax receipts than we are used to. After several months of the borrowing figures rising higher and higher, and with the gilts market turning more and more nervous, January's data suddenly looked a lot better than had been expected.

The first month of the year is always a bumper four weeks for HMRC, as self-assessed tax falls due, as so does capital gains tax (CGT). Even so, January 2026 was better than usual.

The government racked up a surplus of slightly over £30 billion last month, more than double the £15 billion in January 2025.

That doesn’t mean Britain is suddenly in the black. We will still end the year borrowing more than £100 billion to keep the country afloat.

Still, it does mean that chancellor Rachel Reeves has a little more money to play with and the gilts market will be reassured. The IMF won’t be flying into Heathrow any time soon.

And yet it is indicative of the way this government thinks that influential figures such as pensions minister Torsten Bell believe that simply squeezing more and more tax revenue out of a stagnant economy is a measure of success.

Tax receipts are not growing because the economy is growing, because earnings and profits are surging, or because retail sales are growing. It is simply that the state is taking more and more of the pie, leaving less for everyone else.

That becomes painfully clear as soon as you start to drill down into the figures. The biggest increase was in receipts from CGT, with £17 billion collected from the sale of assets, a 69% year-on-year increase, and £1.1 billion more than the Office for Budget Responsibility forecast.

Employers’ national insurance contributed a lot more than last year, as did the self-employed through self-assessment, and frozen thresholds mean the yield from income tax has been heading up. Add them all up, and it is not hard to see why revenues are increasing.

Labour backbenchers will no doubt be thinking of ways they can spend the money. Train drivers and junior doctors could be awarded another pay rise. Welfare benefits can be made more generous. The government can give away more free stuff. Ed Miliband can buy some state-of-the-art windmills.

When it comes to spending money, Labour politicians need little encouragement. It is the one thing they are good at and it will be harder for Reeves to tell them the cash is not available.

There are two big problems, however. To start with, the huge rise in CGT receipts is unlikely to be sustained. With all the speculation about an increase in the rate in the last Budget, investors rushed to sell assets, landlords to get rid of their properties, and entrepreneurs to offload their companies. But you can only sell assets once and the total is certain to fall sharply next year.

It is hardly encouraging for growth that investors are ditching British shares and companies at a record rate, even if it does generate a bit more tax revenue.

The state is taking too much in tax receipts

More importantly, it shows the state is taking too much tax.

The huge tax rises Reeves has imposed are crushing the life out of the economy. The big rise in employers’ NI might raise cash, but it has also destroyed jobs, sending unemployment above 5%, and vacancies to record lows.

Frozen income tax thresholds are destroying incentives, with marginal rates of 60% or more, once student loans and tapered reliefs are taken into account.

It’s hardly surprising if people choose to work less and turn down promotions rather than pay that much.

Likewise, the self-employed are stumping up more tax for now. But there are already worrying signs that many of them are working less or taking early retirement instead of paying punitive rates of tax – the number of people working for themselves has already fallen from a peak of more than five million at the start of the decade to 4.3 million now.

The tax haul tells us the chancellor has pushed taxes too high and she should use the Spring Statement to hand some of the cash back.

A £30 billion round of tax cuts paid for with the January surplus would give the economy a massive boost – and repair some of the damage of the past 18 months.

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Thousands more estates will be hit with a double inheritance tax (IHT) blow within two years – but there are ways you can lower the bill for your loved ones.

The number of estates worth more than £2 million which will start to lose their residence nil-rate band is set to rise by 76% from 3,620 in 2023 to 6,400 by 2028, according to new research by wealth management firm Quilter.

This figure will increase to over 16,000 by 2031 due to frozen IHT thresholds and pensions being subject to IHT from April 2027. Rising house prices will also increase the value of peoples' estates.

IHT is usually payable on estates worth £325,000 or more but this is topped up by an additional £175,000, known as the residence nil-rate band, if you are leaving your home to a child or grandchild. You can pass this £175,000 allowance to a partner if you die.

This means couples who are married or in a civil partnership could leave up to £1 million to loved ones and they wouldn’t owe any IHT.

However, for every £2 your estate is worth more than £2 million, you lose £1 of this residence nil-rate band until it disappears. This means estates left by a single person worth £2.35 million receive no residence nil-rate band, while for couples it’s £2.7 million.

With IHT tax bands frozen at their current levels until 2031 and pensions falling into the scope of IHT from April 2027, more estates will start losing this allowance, Quilter said.

Shaun Moore, tax and financial planning expert at Quilter, said: “Many estates are likely to be hit by the double whammy of pensions being brought into scope for IHT and frozen tax allowances.

“IHT is already a devilishly complicated tax to navigate, and given the rise of asset prices in the past decade or so, many more are having to adapt their strategies in real time to help mitigate it and pass on wealth efficiently to future generations.”

How to reduce your estate to less than £2 million

If you believe you could be set to lose some or all of your residence nil-rate band, because your estate is likely worth more than £2 million, you might want to plan ahead now to protect your wealth.

1. Gifting

You can give up to £3,000 away each tax year without it being added to the value of your estate as well as up to £5,000 to someone getting married or entering into a civil partnership.

Gifts worth up to £250 can be given to as many people as you like each tax year, so if you have eight grandchildren, you could give them £250 each and remove £2,000 from your estate.

However, you can’t use this allowance if you’ve used another allowance on that person. So, you wouldn’t be able to pay someone a £250 gift and another £3,000 gift in one tax year and benefit from both the small gift and annual allowances.

You can also give an unlimited amount of money away and your estate won’t be subject to IHT if you live for seven years after giving it.

Moore said: “Lifetime gifting remains one of the most reliable ways to bring an estate back below the threshold.”

Do note, it’s important to keep records of when and how much you’ve gifted as this will make it easier for your executors to disclose any to HMRC.

2. Charitable giving

Donations to charity left in your will are taken off the value of your estate before IHT is calculated.

If 10% or more of your estate is donated to charity, your overall IHT rate will fall to 36% rather than the standard 40%.

3. Downsizing

You can move to a less valuable home and release some of the equity tied up in your current property to lower the value of your estate.

You will have to give away or spend this equity to actually reduce the size of your estate though and note the seven year rule may apply if you’re giving away money outside of your allowances.

There are also the costs associated with moving home such as estate agent fees, surveys and paying removal firms to factor in.

Rebecca William, financial planning divisional lead at wealth manager Rathbones, said: “Options such as downsizing later in life can help, provided people understand what they can afford to give away and when.”

4. Remove pension wealth earlier

With pensions subject to IHT from April 2027, you may want to start drawing down on your pension or take your tax-free lump sum earlier than planned to release funds from your estate.

Just make sure you’ve got a plan in place so it doesn’t leave you out of pocket down the line in retirement.

Tax-free lump sums can’t be added back into your pension once they’ve been taken out as well, so bear that in mind if you’re planning on withdrawing yours early.

5. Onshore bonds

Onshore bonds written in trust can be an effective way of reducing your future IHT liability if gifted to a family member.

As long as the giver survives seven years, there will be no IHT to pay.