With so many other tax thresholds and challenges being announced in the Autumn Budget, it is little wonder that some things may have slipped through the cracks.
At a glance, it may not have seemed like much was happening with Inheritance Tax (IHT), but the reality is quite different.
We are going to draw your attention to the IHT news you may have missed in the Autumn Budget.
What IHT changes were in the Autumn Budget?
They say no news is good news, but this was not the case for IHT.
The IHT nil-rate band has been frozen at £325,000 until 2031, along with the £175,000 residence nil-rate band, which is a year longer than anticipated.
This means that fiscal drag is likely to push even more people across the threshold and into scope for IHT.
Alongside this, there have been some changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) (also known as Business Relief).
During her speech, the Chancellor confirmed that any unused £1 million allowance for the 100 per cent rate of APR and BPR will be transferable between spouses and civil partners, even if the first death was before 6 April 2026.
This is in line with the transferable IHT nil-rate bands and should be a slight light in the darkness for families who feared they would lose part of their relief entitlements.
It is worth keeping in mind, though, that the reforms do not change the overall thresholds, so any value above the £1 million threshold for APR or BPR qualifying assets will still only receive 50 per cent relief (i.e. qualifying assets exceeding the lifetime £1 million threshold will be subject to a 20 per cent IHT charge).
For a couple, this means that they could have an effective threshold of up to £3 million if they have a home to leave to descendants and both have a significant level of assets qualifying for APR or BPR.
The government also plans to legislate on changes restricting IHT planning that involves using charitable trusts or changing whether trust assets are held in the UK.
How will the changes to IHT affect you?
Estate planning remains necessary for anyone hoping to make the most of any reliefs available, especially if gifting is set to be a part of your IHT mitigation strategy.
For many families, Wills will need to be updated before April 2026 to ensure that the estate is adjusted in accordance with the upcoming changes to IHT.
Our expert team can advise you on how to manage your IHT obligations and make the most of any APR and BPR that might be available to you.
We want to help you preserve your legacy so that future generations continue to benefit from your hard work.
Those whose estates could exceed £2 million have extra pressure to put a plan in place, as their residence nil rate bands are at risk of being tapered, which will result in fewer allowances being available in their death estates.
To find out more about keeping your IHT bill under control, speak to our team today!
