Budget 2026: The Importance of Estate Liquidity in Inheritance Tax Planning

For high-net-worth and ultra-high-net-worth families, inheritance tax planning involves more than establishing the potential liability. Of equal importance is ensuring that sufficient funds will be available to meet that liability without compromising the family’s wider financial and succession objectives.

The 2026 Budget, together with recent and forthcoming changes to inheritance tax legislation, provides an opportunity for families and their professional advisers to review existing arrangements.

Where substantial wealth is held in property, private businesses or other illiquid assets, the ability to fund an inheritance tax liability can be as important as the liability itself.

An Evolving Inheritance Tax Landscape

Recent reforms have introduced additional considerations for families with substantial estates.

Agricultural Property Relief and Business Property Relief

Since April 2026, the availability of 100% Agricultural Property Relief and Business Property Relief has been restricted to a combined allowance of £2.5 million of qualifying assets, with relief generally reducing to 50% above this threshold.

For families whose wealth is concentrated in businesses or agricultural property, these changes may create additional inheritance tax liabilities and increase the importance of having appropriate funding arrangements in place.

Pensions and Inheritance Tax

From April 2027, most unused pension funds and certain pension death benefits are expected to fall within the scope of inheritance tax.

For some families, this will increase the value of their taxable estate and may require a reassessment of existing inheritance tax planning and life insurance arrangements.

The implications of these reforms will vary according to individual circumstances, the composition of the estate and the availability of relevant reliefs.

The Importance of Estate Liquidity

Substantial wealth does not necessarily mean that funds are readily available.

An estate may comprise valuable property, business interests and investment holdings, but have limited accessible cash to meet an inheritance tax liability.

Without appropriate planning, beneficiaries may face difficult decisions about the disposal of assets, potentially at an unsuitable time or contrary to the family’s longer-term intentions.

For professional advisers, understanding how an anticipated liability will be funded is therefore an important part of effective estate and succession planning.

The Role of Specialist Life Insurance

Life insurance can provide a means of addressing this challenge.

When appropriately structured, a policy can provide funds following death to help meet an inheritance tax liability, reducing the potential need to realise assets or disrupt established succession arrangements.

For clients with substantial estates, arranging suitable cover can require specialist consideration.

The amount of cover, premium structure, underwriting requirements, policy ownership and trust arrangements must all be considered in the context of the client’s wider circumstances and objectives.

Existing arrangements also require ongoing review. Changes in asset values, family circumstances and tax legislation may mean that policies established some years ago no longer provide the level or structure of protection originally intended.

Working Alongside Professional Advisers

At John Lamb Hill Oldridge, we specialise in arranging and maintaining life insurance for high-net-worth and ultra-high-net-worth individuals and families.

We work closely with private-client solicitors, accountants, trustees and wealth advisers, providing specialist insurance expertise as part of wider estate and succession planning.

Our approach combines detailed understanding of complex protection requirements with access to the specialist underwriting and policy structures required for substantial estates.

Whether establishing new arrangements or reviewing existing cover, our focus is on ensuring that life insurance remains appropriate to the client’s circumstances and long-term objectives.

Reviewing Existing Arrangements

Changes to inheritance tax legislation reinforce the importance of reviewing both anticipated liabilities and the arrangements in place to fund them.

For families with substantial estates, early consideration of estate liquidity can help preserve flexibility, protect family assets and support an orderly transfer of wealth between generations.

John Lamb Hill Oldridge works alongside professional advisers to provide specialist life insurance solutions for clients with complex estate planning requirements.

To discuss a client’s existing arrangements or potential protection requirements, please contact us at mail@jlho.co.uk.

This article is intended for general information only and does not constitute tax, legal or financial advice. The suitability and tax treatment of any insurance arrangement will depend on individual circumstances and applicable legislation.

John Lamb Hill Oldridge Ltd is an Appointed Representative of Hill Oldridge Limited, which is authorised and regulated by the Financial Conduct Authority.