- 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 £1m 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%.
- This allowance will not apply to AIM-listed shares and similar shares not listed on the markets of a recognised stock exchange, which will therefore receive 50% relief in all circumstances.
- The £1m 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 £1m combined allowance in line with the Consumer Price Index from the 2030/31 tax year.
- On 21 July 2025, HMRC published draft legislation, for technical consultation ahead of its inclusion in the next Finance Bill.
- 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.
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