- No changes to the rate of IHT, which remains at 40%, but the scope was widened and reliefs reduced, so effectively there has been increases here.
- The nil rate band and residence nil rate band of ￡325,000 and ￡175,000 respectively have been fixed until 5th April 2030 (a 2 year increase on the previous position), thus enabling a couple to potentially leave ￡1 million of assets IHT free on their death.
- The residence nil rate band taper threshold for estates over ￡2 million continues to apply, which could reduce the available allowances to just the nil rate band, if the estate value exceeds ￡2.35 million.
- Unused pension funds are included in computing the estate for IHT purposes from 6th April 2027.
- The inclusion of pension funds is likely to push more estates over the ￡2.35 million threshold, creating a double whammy of 40% IHT on the pension and loss of 175,000 of tax exemption (an effective tax rate of 60%).
Agricultural property relief (APR) and business property relief (BPR)
- From 6th April 2025, APR will be extended to cover land managed under an environmental agreement with, or on behalf of, the UK Government, devolved Governments, public bodies, local authorities, or approved responsible bodies.
- From 6th April 2026, the 100% APR and BPR relief will be restricted to a combined ￡1 million of assets. Over the ￡1 million the relief will only be at 50% (so the IHT on the balance would be at 20%). ?
- BPR on quoted shares designated as ‘unlisted’ (e.g. AIM) will no longer be at 100%, it will be at 50% from 6th April 2026.
- The Government will invest ￡52 million to digitalise the IHT service from 2027/28, in order to provide a modern, easy-to-use system, making returns and paying tax simpler and quicker. ??
