Among the rumours circulating are the abolition of the ‘seven-year rule’ and the possible introduction of a tax on lifetime gifts. While these remain unconfirmed, recent history tells us that when changes to IHT are announced, they often take effect immediately, leaving no time to adjust estate planning strategies.

Should these rumours be confirmed on budget day, there will be significant consequences for business owners, farmers, and individuals with substantial pension assets – groups that often rely on lifetime gifting and long-term planning to mitigate IHT exposure. This is especially relevant given the significant restrictions to business and agricultural property relief due to take effect from April 2026. If the Chancellor moves to tax lifetime gifts, or shortens the exemption window, the financial impact could be swift and severe.

Under the current system, lifetime gifts to individuals are treated as Potentially Exempt Transfers (PETs). If the donor survives for seven years after making the gift, provided the gift is absolute, it falls outside the estate for IHT purposes and is not taxed. If the donor dies within seven years and their nil-rate band has already been used up by previous gifts, subsequent gifts may still benefit from taper relief, which reduces the tax payable depending on how long ago the gift was made. For example, gifts made three to four years before death are taxed at 32%, while those made six to seven years prior are taxed at just 8%.

There are also annual exemptions. For example, individuals can gift up to £3,000 per year and small gifts of up to £250 per person are also exempt. Gifts between spouses or civil partners are entirely free of IHT. Certain gifts in contemplation of marriage or civil partnership, up to £5,000, may also be exempt.

In terms of rumoured changes, the Chancellor is reportedly considering extending the seven-year rule to 10 years, or abolishing it altogether, and replacing it with a lifetime gift allowance. This could mean that gifts made during a person’s lifetime could be taxed regardless of when they were made, unless they fall within a new, potentially capped allowance.

Unused pension pots are also set to be included in the IHT framework from April 2027 – a move that will significantly affect those with large retirement savings.

Given the situation, there’s a lot for those who could be impacted to think about, and a short window in which to act on updating estate planning strategies.

Anyone who has been considering passing on assets or making significant gifts should start seeking advice. The gifting rules are complex, and it’s essential to not fall foul of anti-avoidance provisions or the reservation of benefit rules, which prevent donors from retaining a benefit from any gift.

Estate planning is complex, deeply personal and benefits from consideration, but waiting until the budget announcement at the end of November could mean missing the opportunity to make tax-efficient decisions under the current rules.

While the autumn budget may bring clarity, it may also bring change. When it comes to IHT, change rarely waits.

Emma Read is a director in the private client team at Anderson Strathern, based in Edinburgh