When the 2025 Autumn Budget took place, many people assumed that all of the big tax measures for the year had been announced.
However, Chancellor Rachel Reeves wrapped up 2025 with an eleventh-hour announcement in relation to Agricultural Property Relief (APR) and Business Property Relief (BPR) that will increase the allowance available to estates.
For those thinking about estate planning, it is vital that changes to these Inheritance Tax (IHT) reliefs are well understood.
What has changed with IHT?
One of the most contentious aspects of the 2025 Autumn Budget was the refusal to update thresholds that had been causing concern for many people since they were announced in the 2024 Autumn Budget.
Among these were the thresholds for APR and BPR that were originally set to offer 100 per cent relief up to £1 million, after which the relief would drop to 50 per cent.
In the 2025 Autumn Budget, it was confirmed that this allowance could also be passed to surviving spouses or civil partners.
However, in a surprising pre-Christmas announcement, the Chancellor increased the threshold to £2.5 million, which will take effect on 6 April 2026.
This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the nil-rate band.
What will the changes mean for estate planning?
A common criticism of the existing plans was that they failed to account for fiscal drag and the asset-rich, cash-poor nature of many family farms.
Where once the only option available to those facing steep IHT bills was to gift generously and live long enough for the tax burden to pass, there is now more scope to pass on assets through other means.
Regardless, effective estate planning remains imperative ahead of the further reform to IHT that takes effect on 6 April 2027 – the inclusion of unspent pension pots.
For full help and support with managing your family’s financial future, speak to our team today.
