As part of ‘Legislation Day’, on Monday 21 July 2025 the Government published draft legislation under the Finance Bill 2025–26. As part of its continued reform of inheritance tax (‘IHT’) reliefs, HMRC updated its previous announcement on the changes to Agricultural Property Relief (‘APR’) and Business Property Relief (‘BPR’), set to take effect from 6 April 2026. These proposals, outlined further in draft legislation published on 21 July 2025, aim to limit reliefs to genuine business and agricultural interests while curbing greater tax advantages. This post unpacks the key reforms and explores what they could mean for business owners, trustees, and estate planners.
Agricultural & Business Property Relief (APR/BPR)
New £1 Million Relief Cap
- 100% relief applies to the first £1 million of qualifying APR/BPR assets.
- 50% relief applies to any value above £1 million.
Allowance Refresh Periods
- Individuals: Every 7 years
- Trusts: Every 10 years
Valuation & Planning Implications
- Relief is based on market value, so accurate valuations are essential.
- Lifetime gifts made after 30 October 2024 count toward the £1m cap.
- Spouses/civil partners: The allowance is not transferable.
Trusts & Transitional Rules
- Trusts created before 30 October 2024 may retain full relief only if qualifying assets were held at that time.
- Exit charges and anniversary charges will apply the new relief structure.
Pensions & IHT – Major Reform
Unused Pension Funds
- From 6 April 2027, most unused pension funds and death benefits will be included in the estate for IHT purposes.
Reporting & Payment
- Personal representatives (not pension providers as previously suggested) will be responsible for reporting and paying IHT.
- Death-in-service benefits from registered schemes will be excluded from IHT.
Behavioural Impact
May encourage:
- Lifetime gifting
- Annuity purchases
- Revised beneficiary planning
What This Means for Clients
These reforms signal a shift toward targeted reliefs and greater scrutiny of wealth transfers. Early planning, especially before April 2026, can help mitigate exposure and preserve family wealth. Contact us at Trusted Tax Advice to see how we can help you.
