Given how recently the Autumn Budget was, most people had assumed that all of the big tax measures for the year had been issued.
However, Rachel Reeves decided to wrap up 2025 with an eleventh-hour announcement of changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) that will increase the allowance available to estates.
As many will have already been thinking about estate planning, it is vital that the changes to these Inheritance Tax (IHT) reliefs are well understood.
What has changed with IHT?
One of the most contentious aspects of the Autumn Budget was the refusal to update thresholds that had been causing concern for many since they were announced in the 2024 Autumn Budget.
Chief among these were the thresholds for APR and BPR that were set to offer 100 per cent relief only up to £1 million, after which the relief would drop to 50 per cent.
In the 2025 Autumn Budget, it was confirmed that this allowance could also be passed to surviving spouses or civil partners.
However, in a surprising pre-Christmas U-turn, the Chancellor increased the threshold to £2.5 million, when the changes take effect on 6 April.
This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate and residence nil-rate band.
What will the changes mean for estate planning?
The changes are set to be a light in the darkness for many dreading steep IHT bills.
A common criticism of existing plans was that they failed to account for fiscal drag and the asset-rich, cash-poor nature of family farms.
Where once the only option available to those staring down steep IHT bills was to gift generously and hope to survive long enough for the tax burden to pass, there is now more scope to dispose of assets through other means.
Regardless, effective estate planning remains imperative ahead of the other reforms to IHT that are still incoming, such as the inclusion of unspent pension pots.
For full help and support with managing your family’s financial future, speak to our team today.
