Inheritance Tax (IHT) changes

Inheritance Tax (IHT) changes

Following the announcement that changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) were to be made, draft legislation was published on 21 July 2025.

We are expected to receive more details regarding the changes in the next Budget, due to take place at the end of October 2025. We hope this gives a clearer indication of the proposals and changes that will be made to the current legislation.

What are the current rules?

Under the current legislation there is no limit to the amount of qualifying assets that attract 100% relief from IHT. There is currently 100% relief on all Agricultural Land (occupied for the purposes of agriculture), Shares in AIM listed Companies, interests in Unincorporated Trading Businesses and Shares in Unquoted Trading Companies.

What are the changes?

It is proposed that from 6 April 2026 there will be a limit of £1m that one person can claim under APR and BPR. This limit will apply to property, lifetime transfers (within 7 years of the date of death) and chargeable lifetime transfers.

If any assets that qualify for BPR and/or APR are valued over the £1m allowance they will only attract a relief of 50% and will therefore be taxed at the IHT rate of 20%.

The current 100% relief for AIM listed shares is also being withdrawn. AIM listed shares will now attract a 50% relief from when the changes come into effect. You will not be able to use the £1m allowance for AIM shares as they will not be eligible under the proposed changes.

The £1m allowance for APR and BPR will also not be transferrable between spouses, meaning that if the allowance is not used on death, it is lost.

How to prepare for the changes.

• Review your current Wills to ensure they maximise the relief available. It is advisable that the £1m allowance is now maximised across all relevant family members.
• Consider making lifetime gifts of assets.
• Consider how shareholdings are held between family members and trusts to take advantage of valuation discounts on minority shareholdings.
• Review your current situation with your Solicitor, Accountant and Financial Advisor for advice.

If you would like to review your Wills and other documents, please arrange to speak to Emma Sezer or Mollie O’Connor in our Private Client Team.

(This article is not intended to be comprehensive or to provide specific legal advice. It should not be relied upon in the absence of specific advice given in relation to particular circumstances.)