- The government has made a number of announcements related to the inheritance tax regime.
- The current nil-rate band of £325,000 and residence nil-rate band of £175,000 will remain frozen for a further two years until 5 April 2030.
- The government aims to bring the value of most unused pensions savings and death benefits within the scope of an individual’s estate for inheritance tax purposes. The measures will impact both defined contribution and defined benefit schemes where assets are not currently subject to inheritance tax, although the consultation (closing 22 January 2025) launched makes it clear that all life policy products purchased from pension funds, or alongside them as part of a pension package offered by employers, will not be subject to these new rules.
- Agricultural property relief (‘APR’) and business property relief (‘BPR’) will be reformed from 6 April 2026. Currently, APR and BPR provide 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 existing scope of APR will be extended from 6 April 2025 to land managed under an environmental agreement with, or on behalf of, the UK government, Devolved Administrations, public bodies, local authorities, or approved responsible bodies.
- Timing: Unused pensions and death benefits will be subject to inheritance tax from 6 April 2027. 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. The current nil-rate band and residence nil-rate band will remain frozen until 5 April 2030. The extension to the scope of APR will be from 6 April 2025
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