Since the original announcement in the Autumn Budget on 30 October 2024, the significant reforms to Inheritance Tax (IHT) reliefs for agricultural and business assets have been through the initial consultation period.
As of 21 July 2025, draft legislation has now been released, which provides further clarity on how the government intends these IHT reliefs to apply going forward.
The draft legislation has closely followed the consultation document; however, two points have been clarified:
The £1 million allowance will be indexed from 6 April 2030 in line with Consumer Prices Index (CPI).
It was initially proposed that anti-fragmentation rules would be introduced, which would have valued any Business Property Relief (BPR) assets settled by the same settlor into multiple trusts as a single holding. It has been confirmed by the government that they will not proceed with this proposal.
Now that the draft legislation has been released, we will enter another technical consultation period that will last until 15 September, with a view that final legislation will be announced later in the year.
In the meantime, we have summarised the new rules and how these will affect individuals and trusts below and how we can help ahead of these changes coming into effect.
What does this mean for you?
From 6 April 2026, individuals will only be entitled to 100% agricultural property relief (APR) and BPR on assets worth up to a maximum of £1 million. Any value in excess of £1 million will qualify for 50% relief, meaning that there is an effective 20% IHT rate on a death, whereas under previous rules these assets would have been fully relieved.
Trusts set up before the Budget each potentially qualify for a maximum allowance of £1 million, however for trusts set up on or after 30 October 2024, this allowance will be shared between all trusts settled by the same settlor. The rules around how much allowance is available to each trust are nuanced, and in some cases quite complicated, and advice should be taken by trustees of both existing and new trusts to determine how much allowance is available to them.
The Government is going forward with the policy that the £1m allowance will not be transferrable between married couples and (registered) civil partners. If an individual’s Will leaves their assets to the surviving spouse or civil partner, this may result in a waste of the £1m allowance on the first death.
Similarly to the nil rate band, the £1m will refresh every seven years, meaning individuals can transfer £1.65m of business assets into a trust every seven years, without an immediate charge to IHT.
These present potentially significant IHT issues for individuals, who may not have sufficient liquidity in their estates to settle an IHT liability that previously wouldn’t have arisen.
What should you be doing?
With the new rules likely coming into effect from April 2026, time is ticking and the deadline for planning prior to the new rules is fast approaching.
There are various options available prior to April 2026 to help protect wealth but there is no ‘one size fits all’ approach.
It will be important to review existing wills to ensure these are tax-efficient for APR/BPR as a result of the proposed changes.
Consideration about how any potential tax charges will be funded is more important than ever, given the unexpected impact for individuals who might not have been in this position before.
For trustees, it is important to quantify the amount of available relief to ensure that future needs are met and tax liabilities can be funded.
Now is the perfect time to seek professional advice to review your position and ensure your affairs are structured to achieve your goals.
Learn more and get advice
Get in touch with PEM to understand how these changes might impact you and your trust.
You can also use our Inheritance Tax calculator to give you a feel for how you could be impacted.
