Succession planning in Scotland — what you need to know

Commentary from associate James Florance

A well-thought-out succession plan is vital for securing your financial legacy: ensuring your wealth goes to the people and causes that matter most to you.

While my colleague JP Campbell recently covered changes to the tax and pension regime we’re expecting — and although consultations are underway — identifying what assets you have will help determine your options and avoid significant tax surprises down the line.

Recap — why does succession planning matter?

The total UK deaths resulting in an Inheritance Tax (IHT) charge has increased.

For example, in the tax year 2021 to 2022, there were 27,800 taxpaying IHT estates, an increase of 800 (3%) since the previous tax year, 2020 to 2021.

And, in the autumn budget the chancellor, Rachel Reeves, announced significant IHT reforms affecting agricultural and business assets. Starting from April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at a combined total of £1million. Assets exceeding this threshold will receive only 50% relief, effectively subjecting them to a 20% IHT rate, rather than the standard 40% rate.

Plus, the chancellor also announced significant changes to the tax treatment of pensions, set to take effect from April 2027. Under the new rules, most unspent pension funds and death benefits will be included in a deceased person's estate for IHT purposes. This marks a departure from the current system, where such pension assets are typically exempt from this tax.

What should I include in my succession plan?

 Here are some key asset categories to review when creating or updating your succession plan —

1. Cash

Cash is the most accessible asset you’ll have, covering everything from the money in your pocket to savings accounts and ISAs. It’s also the easiest to gift while you’re alive.

However, balance is key. You need to ensure you keep enough funds for your living expenses while taking advantage of gifting allowances to reduce your estate’s taxable value.

2. Property 

Your home is likely one of your most valuable assets. Understanding the details of your property title and ownership structure is critical.

Consider these questions —

• Is the property owned outright or mortgaged?

• Is it in joint or sole names?

• If it’s in joint names, does it have a survivorship destination clause? This clause in a property’s title deeds transfers to the surviving joint owner when the other dies

This information helps determine what’s feasible for succession planning while protecting your current living arrangements.

3. Shares and investments

Investments, such as stocks or bonds, can be lucrative but require careful handling.

The annual allowance for capital gains tax has reduced significantly in recent years, so consult a professional to manage your portfolio tax efficiently. Investment bonds and various policies can also be an option worth considering to pass on your wealth.

4. Pensions

Pensions have traditionally been tax-efficient vehicles for retirement savings. However, the proposed changes in the budget may introduce new tax implications when pension pots transfer to beneficiaries.

It’s vital to include pensions in your overall estate planning strategy to minimise unexpected liabilities.

5. Farms and business interests

If you own agricultural land or a business, succession planning is essential. Historically, these assets benefited from significant tax relief, but future changes could impact their tax treatment.

The budget proposals impacting APR and BPR have attracted opposition, including from the rural sector. There are clear implications for succession planning here to manage future IHT liabilities for those planning to pass businesses down to the next generation. With many farms and family businesses worth in excess of £1million, failing to properly plan could end up in the business having to be sold following a death to pay taxes due.

Again, early planning ensures you’re prepared to adapt to these shifts while protecting your legacy.

How we can help

With anticipated changes to tax laws affecting inheritances, succession planning can feel daunting. It doesn’t need to be though. With professional advice you’ll be able to —

• Minimise tax liability

• Grow the value of the legacy you leave behind

• Ensure your assets pass smoothly to whoever you choose

The earlier you start, the more options you’ll have. Contact our experienced private client team to discuss your circumstances and create a plan that works for you and your family.