Delaying estate planning could cost affluent Brits over £12bn
Brits who are putting off dealing with their estate planning could lose over £12bn in preventable inheritance tax from April 2027, as more middle-income earners brace to be ensnared in the tax net.
Families who are in the top decile of UK wealth who do not begin estate planning until they are 70 could fail to pass on an estimated £12.3bn under post April 2027 rules, according to the latest figures from Octopus Investments.
In contrast, those who begin planning at 50 using multiple strategies, including tax exemptions and reliefs, could on average pass on £397,000 more to their loved ones.
Under current rules, the same shift in timings allows Brits to pass on an average of £258,000 more, or a total of £7.9bn.
Kristy Barr, head of retail investments at Octopus Investments, said: “Most of the wealth lost to inheritance tax isn’t lost to bad planning. It’s lost to no planning, by families who genuinely meant to get round to it or people who simply didn’t realise they had an inheritance tax problem.
“Our research indicated the difference between affluent families starting their planning at 50 and starting at 70 is, on average, nearly £400,000. Multiplied across the country, that is billions of pounds in legacies left on the table.”
The looming cliff edge
The growth in losses comes as more middle-earners are set to be tangled in the inheritance tax (IHT) net, off the back of frozen IHT allowances dragging more estates into higher tax bands and increasing bills, leaving them exposed to the regime change.
Under the changes introduced in the 2025 Autumn Budget, unused pension funds and pension death benefits will be included in a deceased person’s estate for IHT purposes, meaning funds will now be subjected to the 40 per cent IHT rate.
Advisers now expect more than half of their client base to need estate planning support over the next five years because of the pension changes.
Combined with frozen nil-rate bands, which are to be held until at least 2030/31, and two decades of asset price growth, the result is a tax that increasingly catches families who never expected to pay it.
The planning gap
There is also a disconnect between when people think they should begin planning and when they actually do, with many Brits not doing so for nearly another twenty years.
On average, UK adults confirm that planning should begin at around 44 years old, but advisers report clients only beginning to engage with planning their estates at 61.
In the most exposed cohort, those aged 45 to 49, over 85 per cent admitted having done no estate planning, with 70 per cent of those in their 50s also admitting failing to do so.
Advisers pinned the lack of engagement on clients believing they are “too young” to start, having a lack of urgency or finding conversations surrounding death difficult.
Kristy said: “For advisers, this is a clear call to lead the conversation. The value of advice here is not just tax savings. It is family confidence, fewer difficult surprises, and plans that have enough time to work.
“The research also points to a growing opportunity for advisers to build relationships across generations… those that do can help families keep more of what they’ve built, and help their own firms to build relationships that last beyond the initial wealth transfer.”
But advisers are also at a crossroads, with 81 per cent of those who handle estate planning having been in the profession for 20 years or more, meaning a large majority of the workforce is preparing to retire.
This leaves the country facing a possible shortage of specialists in this area, despite an expected surge in demand from next year.