Rachel Reeve's October budget produced much to talk about and will see people taking new and different approaches to how they arrange their financial affairs and plan for their futures and those of their families.  Many of the changes announced will present new challenges for probate practitioners and though we are yet to see much of the detail, here are the key areas which will directly impact the administration of estates.

Pensions

From 6 April 2027 a deceased's unused pension fund and death benefits will be brought into their estate for IHT purposes.  For pension scheme administrators (PSAs) who will, it seems, be liable to calculate and pay IHT referable to their funds direct to HMRC, this is a whole new area of practice.  It will require even closer liaison with personal representatives (PRs) who will need to track down every pension a deceased held to accurately calculate how their nil rate band will be shared across the estate and all pension funds (as well as any other trusts or GROBs).  Let us hope that the proposed Pension Dashboard* will be available in time to facilitate such a search. Where there are differing beneficial entitlements, more thought will need to be given when making distributions to ensure that all IHT has been paid and borne correctly and it is interesting to note that after 12 months, pension scheme beneficiaries will become jointly liable with the PSAs for any unpaid IHT. Discovering further estate assets at a later date may result in a real administrative headache!

APR & BPR

Put broadly, from 6 April 2026 the rate of APR and BPR reduces to 50% for value in excess of £1m.  For probate practitioners, who have long enjoyed simply estimating values where 100% relief applies, there will be a clear need to undertake proper valuations, even if only to demonstrate that the assets fall below the £1m allowance. It is not yet clear how the allowance will be shared as between business and agricultural assets, presumably proportionately.  Where the burden of any IHT falls will be key to beneficiaries and hopefully something considered in advance by Will writers.  Any IHT arising can be payable by instalments and whilst interest (at an increased rate of currently 9%) will be payable, this should only be on late instalment payments.

Non-UK Domiciliaries 

The changes to the UK's non-doms regime provide some much longed for clarity.  For probate practitioners, there will be a need to understand the statutory residence test as, from 6 April 2025, a deceased's IHT position will be assessed with reference to their UK tax residence status rather than their domicile.  The concept of domicile will still be relevant to succession issues such as who benefits under which jurisdiction.  Going forward, establishing if a deceased was a “Long-Term Resident” will dictate if their worldwide assets are within the UK IHT net or just their UK situated assets.  Careful consideration will also need to be given to any trusts created by a deceased, whose assets may currently be excluded property but which from April next year may be subject to IHT, again linked to whether the deceased was a Long-term Resident. 

Noting that the introduction of these changes is staggered over the next three years may provide some relief and a better opportunity to get to grips with each in turn.

*Pensions dashboards: guidance on connection: the staged timetable - GOV.UK