- Agricultural property relief (‘APR’) and business property relief (‘BPR’) will be reformed. Currently, APR and BPR provide unlimited 100% relief from inheritance tax on qualifying assets.
- A £2.5m combined allowance will be introduced and qualifying property within this allowance will continue to benefit from 100% relief. Above this threshold, the rate of relief will be reduced to 50%.
- The relief allowance will broadly operate in the same way as the nil rate band, and any unused allowance will transfer to a surviving spouse on death.
- This allowance will not apply to AIM-listed shares or to shares listed on foreign equivalents to AIM. Instead, where relief is available, relief will be restricted to 50% in all circumstances.
- The £2.5m combined allowance will also be available for trusts in respect of ten-year charges and exit charges.
- The government ran a consultation on the technical detail of applying these changes when calculating inheritance tax charges on trusts. HMRC published a summary of responses on 21 July 2025. The government confirmed it will be proceeding as outlined in the consultation document but will also be indexing the £2.5m combined allowance in line with the Consumer Price Index from the 2030/31 tax year (now deferred to 2031/32).
- Timing: The changes to APR and BPR will apply from 6 April 2026. Lifetime transfers made on or after 30 October 2024 will also be in scope where the donor dies on or after 6 April 2026.
Resources (click to open)
