Inheritance Tax (IHT) has always been a point of concern for families across Scotland, but the Autumn Budget 2025 has pushed it firmly back into the spotlight. With thresholds frozen and new rules affecting everything from pensions to charitable gifts, more estates are likely to be caught by IHT over the coming years.
Understandably, many people are now wondering what they can do — legally — to protect their assets and ensure their loved ones inherit as much as possible.
At Neil Kilcoyne Solicitors, we understand how emotionally charged these decisions can be; estate planning is not just about numbers, it’s about safeguarding your family’s future. Our role is to shoulder the worry for you and provide clear, individually tailored advice that helps you move forward with confidence.
A Quick Look at What Changed in the Autumn Budget 2025
“The Chancellor’s Budget… confirmed what many families feared: inheritance tax is no longer a levy on the ultra‑wealthy, but a creeping burden on the middle class. By freezing the nil‑rate band at £325,000 and the residence allowance at £175,000 until 2030, the Treasury has quietly engineered a stealth tax. Rising house prices mean more ordinary estates will be dragged into the net, even when families never considered themselves “wealthy”.”
The Autumn Budget introduced several key measures that may affect the size of your taxable estate:
- The nil-rate band (£325,000) and the residence nil-rate band (£175,000) will remain frozen until 5th April 2030. With rising property values, this freeze is likely to pull more estates into IHT.
- A new combined £1 million allowance for Business Property Relief (BPR) and Agricultural Property Relief (APR) will take effect from 6th April 2026. This allowance will also be frozen until 2030 and will be transferable between spouses and civil partners.
- From 6th April 2027, many unused pension pots and death benefits will be included in a person’s estate for IHT purposes.
- The current generous exemption for gifts to charities will be restricted to UK charities and CASCs, applying immediately for lifetime gifts, and from 6th April 2026, for gifts on death.
- Compensation from the Infected Blood Compensation Scheme will be fully exempt from IHT.
Although some measures offer welcome clarity, the overall picture is one where foresight and planning will be essential to minimise your future tax exposure.
Learn more about How Inheritance Tax Works in 2025.
How to Avoid Inheritance Tax
Make the Most of Available Allowances
The nil-rate band (£325,000) and residence nil-rate band (£175,000) remain the core tools for reducing IHT. Together, these allow many individuals to pass on up to £500,000 tax-free, or up to £1 million for married couples or civil partners. However, with thresholds frozen until 2031, the value of these allowances will not rise in line with inflation or house prices. This makes early planning all the more important.
A key step is to review your will. To qualify for the residence nil-rate band, your main home must pass to direct descendants. Older wills, especially those using certain trust structures, can unintentionally prevent this, so updating them is often essential.
Couples should also consider how assets are divided, as, if most assets sit in one partner’s name, the unused allowances of the other may be wasted. Equalising ownership through simple, tax-free transfers ensures both sets of allowances are used and can prevent avoidable tax.
In some cases, a nil-rate band discretionary trust included in a will can preserve allowances and offer protection against issues such as care costs. These trusts need careful drafting but can be valuable in the right circumstances.
Avoid Inheritance Tax on Property
Property is often the largest asset within an estate, and inevitably one of the biggest triggers for IHT. There are several ways to reduce the impact:
- You may benefit from downsizing or restructuring ownership, particularly if you no longer need a larger home. If you move to a smaller home and leave assets of equivalent value to your children or grandchildren, you can still benefit from the full residence nil-rate band.
- Joint ownership can provide clarity and a degree of protection, particularly where the property passes automatically to a spouse or civil partner. Switching from joint tenancy to tenants in common allows each partner to leave their share in a tax-efficient way, which can be particularly helpful for blended families or when using both partners’ allowances.
- Gifting property during your lifetime is possible, but you must be prepared to follow the rules carefully. If you continue to live in the property without paying a full market rent, the gift is unlikely to be effective for IHT purposes.
Transferring property is a major decision that can have wide-ranging legal and tax consequences, so professional guidance is essential. Our estate planning solicitors help clients weigh both the practical and long-term implications before taking action.
Use Gifting to Reduce the Value of Your Estate
Lifetime gifting remains one of the most effective ways to reduce your taxable estate – when done correctly.
You may give away up to £3,000 each tax year, with the ability to carry last year’s unused allowance forward. You can also make multiple small gifts of up to £250 per person, so long as no other exemption applies to the same person, and gift larger amounts for weddings or civil partnerships.
Larger gifts may be treated as potentially exempt transfers (PETs). If you survive seven years after making the gift, it will fall out of your estate for IHT purposes. However, gifting without proper documentation or an understanding of the implications can cause difficulties, particularly if the gift affects your own financial security.
One of the most valuable but under-used options is making regular gifts from surplus income. These are immediately exempt, regardless of size, provided they form a pattern and do not affect your standard of living. When used strategically and recorded properly, this allowance can significantly reduce a future tax bill.
Avoid Inheritance Tax With a Trust
When used appropriately, trusts offer a flexible and powerful method of managing wealth and reducing IHT. They can help you pass assets to children or grandchildren while still retaining some control over how and when they receive them.
Different types of trusts, such as discretionary trusts, life interest trusts, and bare trusts, carry different tax consequences and reporting requirements:
- Discretionary trusts provide flexibility for families with young, vulnerable, or financially inexperienced beneficiaries, allowing trustees to decide how funds are used.
- Life interest trusts allow a spouse to benefit from assets during their lifetime while protecting capital for children (useful in second marriages).
- Bare trusts are simpler and often used for younger beneficiaries, giving them full access at 18.
So, because trusts can have IHT charges both on creation and throughout their lifetime, specialist legal advice is essential. A trust that works well for one family may be entirely unsuitable for another.
At Neil Kilcoyne Solicitors, our inheritance tax solicitors take time to understand your goals so we can recommend trust structures that support your wishes while keeping tax exposure as low as possible.
Plan for Business and Agricultural Assets
With the new combined £1 million relief allowance for business and agricultural property taking effect in 2026, reviewing your arrangements now is crucial. Not all business or farming activities automatically qualify, particularly where the business includes passive investment or non-trading elements. Restructuring or reorganising how assets are held can sometimes restore eligibility.
Succession planning is equally important. Handing over shares or farm assets during your lifetime can secure relief, but only when timed and structured correctly. Agricultural land is another area where misunderstanding is common, so reviewing how land is classified and used is essential for maximising relief.
Keep in Mind Pensions and the 2027 Rule Change
Many people are unaware that pensions, until now, have usually sat outside their taxable estate. From April 2027, this will change for many pension arrangements, bringing unused pension funds into scope for IHT.
- Start by updating your expression-of-wish forms so they accurately reflect who should receive any remaining pension funds. These are often overlooked but play a key role in how pension death benefits are distributed.
- You may also need to reconsider the order in which you draw your assets. Using pension funds earlier in retirement may become more tax-efficient for some individuals, but this varies depending on your circumstances.
- Finally, check what type of pension you hold. Some schemes may be affected differently by the rule changes, so understanding how your arrangements will be treated can help you plan ahead with confidence.
For individuals with substantial pension pots, this shift could significantly increase IHT liability. Reviewing your pension structure, your expression-of-wish forms and the order in which assets are to be drawn can make a meaningful difference.
For Families With Assets Abroad: Don’t Overlook Cross-Border Implications
More people in Scotland now own property or investments overseas, whether through inheritance, long-term work abroad, or holiday homes. International estates can create complex interactions between Scottish, UK and foreign tax systems. Even when another country applies its own succession laws, the UK may still charge IHT on worldwide assets if the deceased was UK-domiciled.
Our international probate specialists help families navigate these situations smoothly, ensuring assets are transferred efficiently, and tax obligations are properly managed.
Why Expert Legal Advice Matters More Than Ever
“Inheritance tax was once sold as a levy on privilege. Today, it risks becoming a penalty on prudence — punishing families who worked hard, saved diligently, and hoped to pass something on.”
With thresholds frozen and new rules tightening the net, inheritance planning has become increasingly complex, and what works for one family may not work for another. As award-winning probate solicitors, we analyse both your legal options and the practical realities affecting your family.
At Neil Kilcoyne Solicitors, our aim is to carry your worries on our shoulders. We take the time to listen, to understand your concerns, and to guide you tactically towards the outcome you want. As our client testimonials show, our advice is always tailored to your needs, your wishes and your long-term goals.
Whether you are planning for the future, preparing to downsize, considering a trust or navigating cross-border assets, we are here to help you make informed and confident decisions.
How We Can Help
If you are concerned about how Inheritance Tax may affect your estate or your loved ones, the team at Neil Kilcoyne Solicitors would be pleased to discuss your options. There is no cost and no obligation to find out how we can help, just a conversation designed to give you clarity and peace of mind.
Call us or email us to discuss your inheritance tax planning needs. Alternatively, you can fill out the form below to arrange an appointment with one of our solicitors.
