In the Autumn Budget delivered on 26 November 2025, the Chancellor of the Exchequer confirmed that the changes to Inheritance Tax (IHT) reliefs, originally announced in Autumn Budget 2024, will go ahead from 6 April 2026, with one headline change and a couple more in the detail of the Budget documentation.
Business Property Relief and Agricultural Property Relief
The reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR), first announced at Autumn Budget 2024 and subsequently detailed in the July 2025 Legislation Day (L-Day) draft legislation, will be implemented broadly as planned. The Government’s decision means that the rate of relief on assets currently qualifying for 100 percent BPR or APR will be reduced to 50 percent, except for an allowance per individual or trust of up to £1 million, which will continue to benefit from 100 percent relief (the 100 percent relief allowance).
Shares admitted to trading on a recognised stock exchange which are not ‘listed’, including on the Alternative Investment Market (AIM), along with qualifying shares listed on foreign exchanges which are not a recognised stock exchange, will also see their BPR reduced from 100 percent to 50 percent.
What has changed in Autumn Budget 2025?
In a reversal of previous announcements, there was good news for affected individuals in the form of confirmation from the Chancellor that any unused 100 percent relief allowance can be transferred to surviving spouses or civil partners. This will be the case even where the first death was before 6 April 2026, when it will be assumed that the maximum amount of £1 million 100 percent relief allowance is available for transfer.
This change is welcomed and was something that professionals, including KPMG, had been repeatedly suggesting since the changes were announced. Had the change in approach by the Government not occurred, our view was that well advised taxpayers would have been able to review and where necessary rewrite their wills to ensure any unused allowance was not wasted on the death of the first spouse or civil partner. Those who did not do so would potentially be disadvantaged.
It was also announced that the cap of £1 million on the 100 percent relief allowance will remain fixed until the 2030/31 tax year, after which it will be indexed to the Consumer Price Index. This is an additional tax year in which the amount will be effectively frozen.
Taxpayers who are not long-term UK resident for IHT purposes and own UK agricultural land or buildings via non-UK entities should also take note of the announcement that anti-avoidance rules, to date only applied to UK residential property, will also cover UK agricultural property. These rules, where they apply, treat the value of non-UK entities owning certain UK assets as UK situs, effectively bringing the value within the scope of IHT for those otherwise exempt on non-UK situs assets.
Transitional Provisions
Transitional provisions will apply to gifts of affected assets made between 30 October 2024 and 6 April 2026. These rules are complex and may result in different future tax outcomes, so those affected are advised to take appropriate advice.
Trusts
Trusts subject to 10-year IHT charges and exit charges on distributions will have their own 100 percent relief allowance of up to £1 million. If a settlor transfers qualifying property into multiple trusts on or after 30 October 2024, the allowance is shared between those trusts. Changes to the calculation of the first 10-year charge and special rules for age 18 to 25 trusts will also apply.
Payment of Inheritance Tax
The option to pay IHT by equal, interest-free annual instalments over 10 years will be extended to all property eligible for BPR or APR, subject to certain existing conditions being met. Individuals and trustees should consider how any IHT liability will be funded and be aware that extracting cash from a company may have additional tax implications.
Implications for Individuals
For individuals, these changes are likely to result in higher IHT liabilities unless steps are taken. It is advisable to assess potential exposure and funding options, including the costs of extracting cash from businesses. Accelerating lifetime gifting may reduce IHT exposure, but careful consideration of control, asset protection, and other tax consequences is needed. Reviewing wills and considering life insurance to cover new IHT risks is recommended.
Implications for Trustees
Trustees should review trust terms, consider asset appointments to beneficiaries, and plan for future IHT liabilities, especially if trusts are ‘asset-rich, cash-poor’. Funding options, capital gains tax consequences, and asset protection risks should be evaluated along with family succession plans.
Conclusion
With Autumn Budget 2025 confirming that the IHT reforms to BPR and APR will proceed, albeit with the welcome news that unused allowances will be transferable between spouses or civil partners, affected individuals and trustees should act now to understand and plan for the impact. Early advice, if not already taken, will be essential to manage future liabilities and avoid unexpected outcomes.
For further information please contact: