The UK is now in one of the largest intergenerational wealth transfers in its history. Over £327 billion will be inherited by 2032 – an increase of 100 percent compared to the previous decade. Decisions made today will shape financial outcomes for families not just now, but for generations to come.

The headline figure might be familiar, but the impact of a wealth transition of this magnitude is easy to underestimate. £327 billion is roughly equivalent to the IMF’s estimate of the entire GDP of Greece at Purchasing Power Parity – a staggering amount. Professionals and non-professionals can have an incomplete view of what’s ahead.

The real risks – and opportunities – lie in three areas: timing, tensions, and tools.

Timing: For many years, industry experts mentioned the wealth transfer as something in the future, an approaching event. That’s no longer the case. ONS data shows that households headed by those aged 65–74 hold the highest median wealth – around £500,000 – making this age group the most likely source of intergenerational transfers. The average Baby Boomer is now 69 – placing us squarely in the middle of this window. Every day, hundreds of families inherit assets.

Tensions: As the transition gathers pace, so will the number of impacted people. Each inheritance reflects a complex mix of tax rules, personal wishes, and family dynamics – and it’s nearly impossible for every party to feel fully satisfied.

Tools: Inheritance planning is frequently delayed or avoided. Part of that is the perceived unpleasantness of the topic, with 47% of individuals saying they haven’t discussed IHT with anyone in the last year, according to Irwin Mitchell. Thankfully in this increasingly complex area, there are more and better tools that can help make the decision-making process better. These tools help ensure that beneficiaries receive more of what’s intended for them – and that the preferences of all parties are better reflected.

In this article, we’ll explore how IHT rules have changed, the reasons behind the changes and how strong relationships between advisers and clients can help mitigate some of the biggest challenges.

The Budget: A spanner in the works of estate planning

In just over a year, the Labour government has introduced sweeping reforms that upend long-held assumptions about estate planning.

The government’s first Budget in the autumn brought in arguably the most significant changes to reliefs since the John Major era in the early 1990s.  These changes were collectively designed to, in the words of Chancellor Rachel Reeves, “raise around £2 billion to support public services, primarily affecting the wealthiest 2,000 estates annually.”

The announcement was met by fierce backlash from the agricultural and family business communities. The move was described as a betrayal to family farms by the National Farmers union (NFU) as it could force heirs to sell land to fund their IHT.

Here are the five main policy changes that impact IHT:

‍End of “non-dom status”. Labour’s manifesto promised to “end the use of offshore trusts to avoid inheritance tax”. The Budget’s primary way of accomplishing this is a shift from a domicile-based to a residency-based system for inheritance tax. Individuals who have lived in the UK for 10 years will now face IHT on their worldwide assets, instead of solely domestic accounts.

Tax on estates. There is a new £1 million cap per person, at the full 40% rate of relief, on Business and Agricultural Property Relief, reducing protection for estates built on family businesses or farmland. Estates over this amount will be subject to a 20 percent rate of tax. This has proven highly controversial. NFU President Tom Bradshaw called the reforms “cruel” and “morally wrong.” Farmers even took tractors to Parliament Square in protest, a movement dubbed the “tractor tax.” Meanwhile Treasury Minister James Murray said “threequarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most estates pay”. Despite the furore, the government still plans on introducing this levy from April of next year.  

AIM changes. Investments must justify their risks with appropriate returns. The government’s Business Relief reforms, set to take effect in April 2026, shift that balance. Under the upcoming reforms, AIM-listed shares will qualify for only 50% Business Relief – meaning a 20% effective IHT charge on death. In contrast, unlisted business investments continue to receive 100% relief, up to a combined £1 million limit. These are typically private company shares held for at least two years, designed to support enterprises while offering estate planning benefits.

Taxable pensions. A major change will be the planned inclusion of  unused defined-contribution pensions in the taxable estate from 2027. The change was made to prevent people from accruing  pension pots purely for tax-efficient inheritance purposes. The shift is far from simple, although we do now have draft legislation issued .

“It’s a move that could prove complex and will need changes to trust law to make workable,” Helen Morrissey of Hargreaves Lansdown wrote when the Budget was revealed.

One example relates to commercial property. Many business owners have placed their commercial premises in their pensions as retirement assets. These assets may now need to be sold – or businesses wound down – simply to cover the tax bill. One industry analyst estimated 15,000 small and medium-sized businesses may close because of this change.

Policy in progress.  These changes build on decisions made by previous Conservative governments. The nil-rate band, or the amount of money not subject to inheritance tax, has been stuck at £325,000 since 2009, despite inflation, and will remain frozen through 2030. If it had been adjusted for inflation, the band would top out over £500,000 – considerably more than the current amount. An estimated £355 million more per year will be collected in the 2029/30 tax year  due to this so-called “fiscal drag”.

Taken together, these changes mean that the estate planning landscape has already shifted and will continue to change. While the great wealth transfer has long been expected, the tax changes accompanying it were not. Estate planning needs to be adjusted.

Planning in a new era

With so many changes, an increasing number of Britons are finding a gap between their understanding of inheritance tax and actual reality. Here’s an increasingly common case. One family faced a £20,000 tax bill when settling the estate of their late parents. They were shocked, as the deceased had for decades assumed everything had been “sorted”.

The truth is that while at one point in time the planning approach may have resulted in no tax liability, that was no longer the case. Their estate didn’t change, but tax policy around them did.

The changes are so extensive and wide-reaching that it will be the minority of estates that completely avoid the consequences of new legislation.   The finer points remain undefined as the rulemaking process continues. Already government climbdowns on welfare reform contributed to recent statements from The Chancellor’s office that additional tax hikes in the autumn Budget are not off the table.  

The scale and complexity of these changes can feel overwhelming – and that reaction is entirely valid. Families – benefactors and beneficiaries alike – need to accept that it is truly “a new world” in IHT. Feelings of unease and apprehension are completely normal. While a desire to have a single, definitive planning conversation is natural, it’s no longer completely practical.

There’s also the human predilection towards avoidance in the face of the complicated, challenging feelings that arise around death. Many choose to avoid planning at all – or create an only very cursory will that doesn’t map their entire estate and holdings. The consequence of this decision frequently means an outcome that benefits no one. Probate delays, family disputes, surprise tax bills – a dragged out and expensive process everyone should avoid.

Thankfully families don’t have to do this alone. A caring, well-informed adviser can be an indispensable partner on this journey. Many advisers work with clients over the years, drawing out and understanding the wishes of interested parties. They can, tactfully, raise more difficult questions. One example is how to account for children who’ve received financial support from their parents or grandparents. Legal & General data indicates that 32%^[1] of first-time buyers received deposit help in 2023, with 47%^[2] of buyers under 55 getting support from parents and nearly 40,000 cases of grandparent assistance. Families might decide to reflect this in how they decide to divide assets – or not.  

With an ever-changing IHT landscape, there is a growing need for families to act, particularly as nearly 80% of probate applications are now completed digitally. This trend highlights a shift toward faster, more accessible estate planning tools. Families must understand what services are available, and how to use them effectively. This can make a significant difference in preserving wealth and reducing stress during an already challenging period.

Towards a feeling of security in a changing market – dynamic planning and better support for advisers

Britian’s tens of thousands of advisers everyday see the Great Wealth Transition in practice. They must balance psychological, financial, emotional, and legal factors in helping create an estate plan. Frequently they will confront unrealistic ideas or opinions that are simply not always possible. In an environment flooded with advice and opinion, professionals must cut through to deliver accurate, timely guidance.

Advisers need to help families build fair, flexible frameworks – not just tax-efficient ones. The goal isn’t always simply to pay the least amount of tax (although this is important) but to create an estate that reflects the values and desires of the people involved.

Tactful advice means acknowledging the sheer diversity in today’s society. Planning frequently involves simultaneous conversations with several generations, who often hold differing ideas and values around money. Studies show that while Baby Boomers are concerned with preserving capital and minimising tax, Generation X is more focused on financial independence and early retirement, and Millennials on value-driven investing and housing affordability. To facilitate engagement, flexibility is often required. Advisers may need to meet family groups in different configurations according to the desires of the main client or assign specific advisers to particular descendants or groups of descendants.

Advisers must balance the wishes of the client with complex family dynamics – and that challenge is only growing. High net worth individuals may have detailed instructions about how much they want to reveal to their future beneficiaries about their finances. This could include fear of starting a difficult conversation or hurt feelings. Increasingly estates will contain more exotic assets such as online businesses with international entities, private market shares from crowdfunding, cryptocurrencies, and digital assets.

Changing family structures are also complicating what “fairness” looks like. Blended families, later-in-life marriages, and long-standing estrangements mean that dividing an estate evenly is rarely the same as dividing it fairly. One child may have acted as a carer, another might have been estranged for years, and a new spouse may arrive with children of their own. Advisers are increasingly called upon to help clients navigate emotionally charged decisions where legal rights and personal values don’t always align. In these cases, technical knowledge must be paired with empathy – and careful documentation – to ensure that the outcome reflects the client’s intent and reduces the risk of dispute.

Advisers have several strategies they can use to lower tax liability and ensure generational wealth transfer.

Here are three of these strategies that are relevant considering the proposed IHT changes:

Gifting strategies during lifetime. Place a greater emphasis on handling estate matters while people are living. Gifting assets, potentially into a trust,  while alive can reduce the value of an estate and, if survived by seven years, fall outside the IHT net. Structured gifting using annual exemptions and potentially exempt transfers (PETs) can be a powerful long-term planning tool.

Life insurance to cover liabilities. A life insurance policy written in trust can provide a tax-free lump sum to cover any IHT due on death. This ensures beneficiaries aren’t forced to sell assets quickly just to meet HMRC deadlines.

Business Relief-qualifying investments. Investing in BR-qualifying assets – including shares in unlisted trading companies – can offer up to 100% IHT relief after two years. This allows investors to retain control of their capital while reducing the eventual tax burden on their estate. These approaches support tax-efficient pension withdrawals, greater flexibility and intergenerational engagement. Structured estate solutions that allow for smoother transitions and family engagement during life.

Conclusion: A better way

The size and scale of the ongoing transition means millions will be impacted. In a time of transition, estate planning needs to reflect new realities: tax pressure, family friction, and lifetime action. This isn’t the way that previous generations thought about these issues, or even what was true when the impacted generations were slightly younger.

That’s why it’s critical to pair flexible, forward-thinking planning with investment solutions that adapt to modern needs. While not without their own considerations – such as periodic and exit charges - trusts remain a powerful tool in this landscape, offering both tax    efficiency and control over how assets are distributed over time and among family members. Other IHT tools, like Business Relief-qualifying investments, can provide quicker access to relief and retain client ownership. Advisers supported by Downing can help clients protect what matters most, not just for tax reasons, but for future generations and the legacy they want to build.

The window for low-friction planning for many families is narrowing. Advisers have a unique opportunity – and responsibility – to help families act before policy catches up with them.

This article is written by:

Tony Sime

Partner and Sales Director

Important notice

Opinions expressed represent the views of the author at the time of publication, are subject to change, and should not be interpreted as investment or tax advice.

This article is for investment professionals only. This article is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. No reliance should be made on this content to inform any investment of tax planning decision.

This content contains information that is believed to be accurate at the time of publication but is subject to change without notice. The explanation of all of the tax rules set out have been written in accordance with our understanding of the law and interpretation of it at the time of publication.

Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.