If you are one of the many individuals and business owners who were disheartened by the Autumn Budget, the recent announcement from the Chancellor may help alleviate some of the burden.
Continued concerns about Inheritance Tax (IHT) ahead of the cap to Agricultural Property Relief (APR) and Business Property Relief (BPR) effectiveness may have finally been heard.
With the thresholds receiving an update, it is time to determine the impact and how it will affect your estate planning.
What is changing with APR and BPR?
Once known for the generous relief offered, APR and BPR are going to receive a cap to the 100 per cent relief as announced in the 2024 Autumn Budget.
This was originally going to be a £1 million threshold, with anything above this only receiving a 50 per cent relief.
Business owners were concerned that this would see establishments that had been forged over many years ending up as a financial burden for loved ones, as IHT bills took a bite of the value.
These fears were echoed by farmers who tend to have much of their wealth tied to high-value assets that are necessary for a farm to operate effectively.
Seeming to understand some of the concern, the Government announced in the 2025 Autumn Budget that the allowance could be passed to surviving spouses or civil partners even if they died before April 2026.
However, more good news came in the form of a surprise U-turn from the Chancellor as she revised the thresholds to be more generous.
The threshold for APR and BPR will be increased to £2.5 million when the changes take effect on 6 April.
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 existing allowances such as the nil-rate and residence nil-rate band.
What is the best way to prepare for these changes?
While the adjustment to thresholds is welcome, it does not change the fact that there currently are not these thresholds at all.
As such, the new APR and BPR will still be less generous, albeit more generous than they could have been.
This means that estate planning is still a vital way of keeping IHT bills under control.
With unspent pension pots set to be pulled into IHT calculations from 2027, this is the year to get your estate straightened out while you can.
It was feared ahead of the Autumn Budget that the Chancellor might alter the rules around gifting, but this did not come to pass.
Gifts that are given seven years before a person dies remain entirely beyond the scope of IHT, while gifts given within that time period are taxed at a tapered rate.
It could be worth determining whether gifting is a good option for your estate, as this remains the most effective way of lowering an IHT bill.
On the whole, seeking professional financial support is vital for getting 2026 off to a good start.
We can help you understand your current IHT liabilities and help you plan your estate more effectively.
Make sure that you stay in control of your family’s financial future by speaking to our team today.
