UK Trends and Developments Contributed by: Ros Bever, Claire-Marie Cornford, Helen Clarke and Ashley Hill, Irwin Mitchell
Navigating the Great Wealth Transfer: an Evolving Private Wealth Landscape Over the next 30 years, in the UK it is anticipated that more than GBP5.5 trillion will be passed from the Baby Boomers to the younger generations. The “Great Wealth Transfer” will significantly impact the private wealth industry, creating both challenges and opportunities. This historic shift in wealth is taking place in an age of longer living, increased incapacity and changing family structures. This article considers some key themes across UK private client services, family law and wealth protection in 2025. Tax Policy in a Changing World In the UK, there have been radical changes to the taxation of non-UK individuals and the structures established by those individuals, which took effect on 6 April 2025. The previous law was centred around the concept of domicile, where a person is considered to have their permanent home. The reforms involve a move to residence-based tax rules, using the UK’s statutory residence test (based on a day-count each tax year) to determine liability to personal tax. These changes have significant implications for the way non-UK individuals are subject to income tax, capital gains tax and inheritance tax (IHT) in the UK. A new “foreign income and gains” regime will allow individuals moving to the UK to claim a tax exemption for non-UK income and gains (and some employment income for duties abroad) in their first four years of UK residence. The changes to the IHT rules are particu - larly controversial, with non-UK individuals and the trusts they have created now subject to IHT if they are UK-resident for ten out of the 20 years preceding the tax year in which the relevant tax event takes place. As a result of these far-reaching changes, internation - ally mobile individuals are considering their options and looking to make full use of tax reliefs and estate planning tools available to them under the new regime. Other recent IHT developments apply more broadly across the UK population. Currently, 4% of UK estates are subject to IHT at a rate of 40%, subject to reliefs and allowances. However, a recent report by Irwin Mitchell LLP confirmed that the percentage is rising, with the proportion of estates liable to pay IHT set to
increase to 5% by 2027 and 7% by 2028. The total liability will rise from the GBP5.5 billion collected in 2021/22 to almost GBP9 billion in 2026/27. The are several tax measures contributing to this trend. The UK’s “nil-rate” allowance of GBP325,000 for each estate before IHT is applied has been fro - zen until 2030. The government has also announced some major changes to IHT over the next two years. From April 2027, the value of most unused pensions and death benefits are to be subject to IHT on an individual’s death, bringing increased numbers of people within the scope of IHT. Other valuable IHT reliefs relating to agricultural and business assets will be considerably reduced from April 2026, creating additional tax and succession challenges for farmers and other business owners. This will mean that some assets that previously benefited from unlimited 100% relief from IHT will have that relief capped at GBP1 million. This is likely to result in the adoption of more creative planning solutions and an increase in lifetime gifts of assets either outright to individuals or to other structures. Some consider that these reforms do not achieve their intended aims and result in a disproportionate level of complexity for the revenue generated. Earlier this year, the Society of Trust and Estate Practition - ers (STEP) responded to the House of Lords call for an evidence paper related to their “Preparing for an Ageing Society” inquiry. The response argued that there was a need for further IHT changes to target inter-generational fairness and the efficient transfer of assets between generations. Specific recommenda - tions from STEP included a lower flat rate of IHT (a suggested 10%) along with a reduction in reliefs that arguably benefit some disproportionately. Undue Influence and Contentious Estates: the Greatest Will Legislation Reform in Nearly 100 Years The Great Wealth Transfer is having an impact on estate disputes. The ongoing cost-of-living crisis in the UK, coupled with increasing property prices, plac - es more importance on inheritance for the younger generations. This, together with more complex fam - ily structures and an increasing awareness of the grounds on which a deceased’s estate can be con -
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