How did the Autumn Budget 2024 change IHT reliefs?
Broadly some notable IHT reliefs have been capped.
Business and Agricultural Property Relief
- From 6 April 2026, the 100% relief currently available for qualifying business and agricultural assets (such as farms, unquoted trading company shares etc) will be capped at the first £1m of combined assets. Value exceeding this threshold will quality for relief at 50%, resulting in an effective rate of tax at 20%. Assets already qualifying for the 50% relief rate (e.g. personally owned assets used in the business) will continue to receive relief at this level.
- This £1m cap will apply to the combined value of qualifying assets within the estate at the date of death, failed lifetime gifts (where the donor dies within seven years of the gift), and chargeable lifetime transfers such as transfers into trusts.
- The £1m allowance will not be transferable among spouses.
- From 6 April 2026, shares in businesses listed on AIM will no longer qualify under the £1m threshold and will instead attract relief at 50%. However, there was one extension of reliefs.
- From 6 April 2025, agricultural property relief will be extended to include land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities or relevant approved responsible bodies.
What should Individuals do?
Anyone with a trading business or agricultural interests should review the position to ensure that they understand whether their assets qualify for either business property relief (‘BPR’) or agricultural property relief (‘APR’) in the first instance.
Individuals with qualifying assets should then consider their personal position and the options available to them which may include:
- Using qualifying assets via a trust to pass wealth to the beneficiaries of their estates free from IHT.
- Considering taking out life insurance policies written into trust to cover any additional liability
- Tax planning strategies involving the use of Family Investment Companies (‘FICs’) or growth/freezer shares may still be effective. Additionally, gifts can still be an effective means of passing wealth to beneficiaries while minimising IHT.
- Lifetime gifts can still qualify as potentially exempt transfers. Provided that failed potentially exempt transfers are made three years prior to death, there is still taper relief.
- Gifts of cash are exempt if they are made out of normal expenditure, are made out of the transferor’s income and are intended to allow for recipients to maintain their standards of living.
There are varying tax implications on the options mentioned above which need to be considered in more detail to establish whether these are suitable for you. We would suggest Trusted Tax Advice carry out a review of your personal circumstances to establish which options are best placed for you and your family.
How were trusts affected?
From 6 April 2026, trustees will have access to the £1m relief allowance for qualifying assets in the event of a 10-year anniversary or exit charge. However, trusts created by the same settlor before 30 October 2024 will each retain their own £1m allowance.
The government intends to introduce anti-forestalling rules to ensure that the allowance is divided between these trusts where a settlor sets up multiple trusts on or after 30 October 2024.
Additional changes are anticipated for trusts, with a consultation set for publication in early 2025 to examine lifetime transfers into trusts and IHT charges on trust property in relation to the new allowances. The upcoming consultation will address the application of the £1m allowance for ten-year anniversary and exit charges, offering additional guidance to assist trustees in managing these obligations.
Get in touch
Trusted Tax Advice can provide advice in relation to reviewing your company status for BPR or agricultural interest for APR. For more information please contact us.
