Law firms urged to ‘act now’ to protect clients from IHT hikes

UK law firms have been urged to act now to protect their clients ahead of expected inheritance tax (IHT) hikes from April next year.

The warning was issued by Depledge Strategic Wealth Management founder and CEO, Andrew Day, who reported seeing a sixfold increase in enquiries from legal firms in the first four months of 2026 compared to previous years.

Day stated that, when the government’s new IHT regime takes effect in April 2027, effective tax rates on unused pension pots could rise from 0 per cent to as high as 81 per cent in certain circumstances.

The firm had seen a surge in enquiries as probate, wills and estate planning lawyers began to realise how financially exposed clients will be when the changes take effect next year.

Unspent pension pots had previously been one of the most effective and tax-efficient methods of transferring wealth to surviving relatives.

No IHT is currently paid by the recipient and future drawdowns are not subject to income tax if the deceased is under 75, but this will change in April 2027 when the Finance Bill 2025/26 comes into effect.

“This is a seismic change that many people are currently unaware of,” Day stated.

“Those who are, including lawyers looking to safeguard their clients’ assets across generations, are waking up to this issue and contacting us.

“In the first four months of a typical calendar year, we would expect some contact with law firms, however, this year we are meeting with six new firms.

“I was sat in a meeting with a potential client introduced from one law firm the other day when my phone rang and it was another law firm wanting to introduce another client to see if we could help them too.”

Depledge noted that effective planning options do exist, but require timely professional advice, with key strategies including making use of spouse exemptions, reviewing legal status through marriage or civil partnerships, implementing structured gifting programmes, redirecting surplus funds into beneficiaries’ pension arrangements to reduce taxable estates, buying exempt assets, and insuring lives.

“While many legal firms are cottoning on to this already, many are slow out of the blocks,” Day said.

“The message is clear: legal services firms must act now to help clients understand the implications and explore mitigation strategies before and after the rules take effect.”

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