The Autumn Budget: Structuring wealth across generations

Ahead of the Budget, we look at the current position, confirmed changes for the new tax year, possible further reforms and, most importantly, what clients can do now to support their wealth strategy.

Our most important pre-Budget message is simple: don’t act suddenly on something you hadn’t already planned.

For intergenerational wealth and succession planning, start by understanding the legislation and wider landscape shaping family decisions.

Most clients want their wealth to support their family sensibly. Their concerns often centre on how to pass it on efficiently, how to deal with the different circumstances of individuals within their family, and how much could be lost to tax.

With possible tax changes ahead, particularly to inheritance tax, consider what you want for yourself and your family. Your considerations may include planning how much to retain or give away, when’s the optimum time to act, and which structures or gifts could help you achieve your aims tax-efficiently.

Retain flexibility where possible: some decisions can’t be reversed. Don’t panic in the run-up to the Budget or act solely on what might happen. Laws and taxes might change further in the future too, so we advise regular reviews of any plans.

A major wealth-planning change in the Finance Act 2026 affects the inheritance tax treatment of pensions. For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will be included in a person’s estate for inheritance tax purposes. This reduces the long-standing tax advantage of leaving wealth within a pension.

Under the new regime, unused pension assets passing to children or other beneficiaries may be subject to inheritance tax at up to 40%, depending on the estate’s value and available reliefs. Transfers between spouses and civil partners remain exempt.

The impact may be greater if the pension holder dies aged 75 or over. Beneficiaries may pay income tax at their marginal rate when withdrawing inherited funds, after the pension has also been considered for inheritance tax as part of the estate. Those with significant pension wealth may therefore wish to reassess the role of pensions in their estate plans and explore other ways to pass wealth to the next generation.

Every Budget attracts speculation ahead of the event, but until the Chancellor delivers his speech on 28 October, nothing is certain. The Labour Party manifesto included promises not to raise the rates of Income Tax, National Insurance Contributions, or VAT, which means that much that speculation has centred on taxes that raise lower amounts for the government. It’s also important to note that the government has frozen the Personal Allowance, basic and higher-rate income tax thresholds and equivalent National Insurance thresholds until April 2031.

Capital Gains Tax

Each year, there is speculation that Capital Gains Tax (CGT) rates could rise or be aligned with income tax, potentially taking them to 40% or 45% for some. However, higher rates do not necessarily raise more revenue because they can change taxpayer behaviour. When the main higher CGT rate was set at 24% last year, Treasury modelling suggested that a further increase of just 1% could result in a reduction in the tax take.

If the rate of CGT were to be raised substantially, it is likely that the economy would see a return of “indexation allowance”, meaning that tax is not charged on capital gains that are due to the effect of inflation.

There has also been speculation that an “exit tax” might be levied on people leaving the UK to live elsewhere. This could treat assets as if they had been sold when an individual becomes a non-UK resident, triggering CGT. Similar regimes exist in other countries. 

Inheritance Tax

Another area under discussion is the interaction between inheritance tax (IHT) and CGT.

Under current UK rules, death does not itself trigger CGT. Inherited assets are treated as acquired at their market value on the date of death. IHT may apply to the estate, while CGT generally applies only to any increase in value after death when the asset is later sold.

Some think tanks and policy groups have proposed removing this “CGT uplift on death” which would preserve gains built up during the deceased’s lifetime for CGT purposes, potentially increasing the tax due when beneficiaries sell the asset.

A rise in IHT is also worth monitoring, particularly given debate over how to fund social care. However, with Baroness Casey’s social care review due in summer 2027, changes linked directly to that work may be less likely in the 2026 Budget.

Property tax

There has been discussion about reforming the considerable number of property taxes in the UK, in particular Stamp Duty Land Tax (SDLT) and Council Tax and their Scottish and Welsh equivalents. In England, a High Value Council Tax Surcharge is due to begin in April 2028, affecting properties valued at over £2m, and the Scottish government is introducing new Council Tax bands for properties in Scotland valued at over £1m. Several suggestions have been made for a more extensive overhaul but, as with any radical changes, it would likely take quite some time for the practicalities to be agreed.

It’s tempting for individuals to feel that they “ought” to act ahead of the Budget in case of tax changes.  Sometimes people look at selling portfolios because they are worried about Capital Gains Tax rises or making gifts to children in case of changes to IHT; some even consider leaving the UK amid concern about repeated tax rises.

However, each of these courses of action can have downsides, including non-tax consequences. It is more prudent to focus instead on how your wealth is held, what you need to retain, and what you may wish to give away or pass on to the next generation, and discuss this with your Private Banker.

Cash flow planning can help wealthy families consider their options. Knowing what you will need in the future and what might be surplus to your requirements can focus your thoughts about your estate planning objectives in your lifetime.

It is helpful to talk to a professional who can help you think through the best way to arrange your affairs to achieve your financial aims. For example, pension funds have been outside IHT, and many people planned that they would be untouched, to be inherited on death, but the forthcoming IHT changes may prompt some to use pension funds differently. Some people might look at using their Pension Commencement Lump Sum (PCLS) – the amount of a pension fund that can be withdrawn tax-free – to make gifts to the next generation. These withdrawals are generally treated as capital rather than income and would therefore usually be potentially exempt transfers, meaning the donor normally needs to survive seven years for the value to fall outside their estate for IHT purposes. Others may be planning to take an income from their pension fund and to use it to pay life insurance premiums to help pay IHT on their death.