The Significant Inheritance Tax Changes from the Autumn Budget

The Autumn Budget has introduced significant changes to the Inheritance Tax (IHT) regime, with reforms set to take effect from April 2026. These include changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), as well as the inclusion of most unused pensions in the IHT regime.

From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) at 100% is planned to be capped at £1million in total for each individual. Any qualifying assets above this threshold will receive only 50% relief from IHT. These reliefs will apply after using an individual’s Nil Rate Band of £325,000 and the Residence Nil Rate Band of £175,000 where available.

Agricultural Property Relief (APR)

APR applies to the agricultural value of qualifying agricultural property. To claim APR, specific conditions must be met regarding the occupation and ownership of the property. The property must either have been occupied by the taxpayer for agricultural purposes for two years prior to the taxable event or have been owned by the taxpayer throughout the seven years ending with the date and was throughout that period occupied by him or another for the purposes of agriculture.

Business Property Relief (BPR)

BPR provides relief for interests in trading businesses. This relief applies to the full value of the business, except for assets not used in trade. For BPR to apply, the business must have been owned by the taxpayer for at least two years prior to any gift or upon death.

An important consideration for couples is that the new £1 million allowance for APR and BPR is not transferable between spouses unlike the Nil Rate Band and the Residence Nil Rate Band. This means it is essential for couples to ensure that ownership of assets are appropriately divided between them and that they have a suitable Will in place to enable each £1 million allowance to be used on each death.

A consultation on these reforms is scheduled for early 2025. This will provide further details and present an opportunity for industry feedback. It is possible that we may see some changes before the final legislation.

Pensions

Finally, it was also announced that from April 2027 most unused pensions are going to be brought into the IHT regime, further increasing the importance of proactive inheritance planning.


What Next?

We understand the complexities these changes introduce and are here to assist you with planning and advice. If you have not yet reviewed your IHT position, now is the time to take action.

If you need further information or assistance, please do not hesitate to get in touch. Call Alison Short or Kelsey Butterfield at 01904 655202 or email enquiries@hghyork.co.uk