Now is the time to act to safeguard your family’s assets before new Inheritance Tax rules take effect.

The draft tax legislation for the 2025/26 Finance Bill has been released by the UK Government, which includes the anticipated reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) for Inheritance Tax purposes. As you may be aware, these changes will have a significant impact on the majority of families and their business interests. If you have not yet considered what the impact of these changes mean for you, then we recommend you reach out to your JC advisor.  

Our Private Client Tax team have shared below a reminder of the key things you must be thinking about now in order to protect your family wealth before the full impact of the Inheritance Tax changes come into force from 6 April 2026. Some of the below will not be possible to implement without incurring an upfront tax bill after 5 April 2026 and therefore are more time sensitive.

As the deadline approaches, we expect a significant increase in demand for advice and implementation, which may lead to capacity constraints across the professional services sector, including legal advisers. We recommend early engagement with us if you are wishing to consider your options before 6 April.  

Please also note, if you have taken previous Inheritance Tax advice prior to 30 October 2024, we would recommend you get in touch with us to review this advice as the new changes announced may well impact the previous advice.  

Introduction of a £1million cap - ‘100% Relief Allowance’

The amount of IHT relief available at 100% for qualifying APR and BPR assets will now be capped at £1 million per individual, with relief given at 50% thereafter.

This allowance will:

Be frozen until 6 April 2030, after which it will increase in line with inflation.

Refresh every 7 years for individuals.

Be apportioned where multiple transfers are made on the same day, and otherwise applied in chronological order.

On death, be allocated across all qualifying 100% relief assets if their total value exceeds £1 million.

Reduced relief for certain shares

AIM shares and other unlisted but traded shares will now qualify for only 50% IHT relief, down from 100%.

Shares listed on foreign exchanges (that are not recognised UK exchanges) will also be subject to the reduced 50% relief rate.

Transitional rules

Transitional provisions will apply to transfers made between 30 October 2024 and 6 April 2026, as well as trusts established before 30 October 2024.

Transfers of qualifying property can still be made into Trust before 6 April 2026 with the benefit of full APR and/or BPR. This means, that no initial tax entry charge arises at the time of transferring assets into Trust, where the value transferred by the individual is greater than the £1m Allowance and available nil rate band.

Instalment payments extended

The option to pay IHT in interest-free instalments over 10 years will now apply to all APR/BPR-eligible property, where previously the relief was more narrowly defined.

Clarification on spousal transfers

Importantly, the draft legislation confirms that the £1 million allowance only applies to chargeable transfers. This means transfers between spouses or civil partners, being exempt, will not inadvertently use up the relief.

Trusts

A separate ‘100% Trust Relief Allowance’ of £1 million will apply to qualifying Trusts and will refresh every 10 years.

Trusts created by the same settlor after 30 October 2024 will share a single £1 million allowance, apportioned in chronological order, meaning multiple allowances will not be available.

For Trusts established before 30 October 2024, each Trust will benefit from its own £1 million allowance (assuming it held qualifying assets on that date). Transitional rules also apply on exits or Trusts wound up before the first 10-year anniversary arising after 6 April 2026.

A temporary relaxation allows Trusts settled between 30 October 2024 and 6 April 2026 to be unwound and still benefit from full APR/BPR relief - even if the usual 2-year ownership condition hasn’t been met. Once unwound, the Trust is no longer counted towards the relief limits.

Looking ahead

Our expert Private Client Tax advisers are assessing the implications and will continue to engage with various consultation processes.

 If you have any immediate questions or would like to discuss how these proposals may affect your existing plans, please don't hesitate to get in touch with your usual Johnston Carmichael adviser.