In the past few months, you’ve likely come across numerous articles about inheritance tax. The media has focused on the upcoming reforms and what they could mean for families and businesses across the UK. The UK applies a 40% tax above a £325,000 threshold, while other countries take very different approaches. Such as the France forced heirship rules, whereas Australia that have abolished inheritance tax altogether.
What Is Inheritance Tax?
Inheritance Tax is a tax on the estate which includes property, money and personal possessions of someone who has passed away. In the UK, Inheritance tax is charged at 40% on the value of an estate exceeding £325,000.
Inheritance Tax Differs Across Countries
Each country has their own inheritance tax rules which can be crucial when estate planning or moving abroad with your assets.
- Estate-Based Taxation: In countries such as the UK and the United States, the entire estate of the deceased is taxed on its total value before any distribution to heirs.
- Beneficiary-Based Taxation: In many European countries, such as France and German, tax the individual beneficiary. The tax bill considers the amount each person receives and their personal financial situation.
- No Inheritance Tax: Countries including Australia, Estonia and Austria do not impose no inheritance tax, but other taxes may apply.
What Are The Incoming Changes To UK Inheritance Tax?
Reforms to business and agricultural property relief from April 2026
This new rule will affect people who are expecting to inherit a business or agricultural property worth more than £1 million. Previously, businesses and small farms could be handed down through generations without any Inheritance tax. The National Farmers Union estimates that up to 70,000 farms across the UK could be affected. Farming unions are currently protesting these changes as they can potentially risk damaging small family businesses.
Pensions will become taxable from April 2027
From April 2027, pensions will be counted as part of a person’s estate and will be included in inheritance tax calculations. This will be taxed at the standard rate of 40%. It has been suggested to people to research into gifting money or spend their pensions to reduce their inheritance tax.
Frozen Thresholds Until 2030
The current nil-rate band is £325,000 and residence nil-rate band is £175,000. While not confirmed this may change from April 2031. Due to rising property prices and values, more estates are being subject to inheritance tax liability.
Conclusion
Inheritance tax varies across countries, reflecting each nation’s approach to wealth redistribution and social priorities. Understanding which rules apply to you and your assets is essential for effective planning.
The UK’s inheritance tax upcoming changes essentially mean more estates will be taxed, especially middle‑income families with property values increasing and pensions included in estates. The changes may create some financial strain and force people to rethink their estate planning by gifting or spending pensions. For more articles like this, please click here.
