The main bulk of Inheritance Tax (IHT) changes were announced in the 2024 Autumn Budget and caused much concern for those whose previously established plans were at risk.
There was much speculation ahead of the 2025 Autumn Budget that more areas would be targeted to increase IHT bills.
However, the announcement seemed to be largely positive, so it is worth taking stock of what has changed and how it might affect estate planning going forward.
What did the Autumn Budget change for IHT?
Agricultural Property Relief (APR) and Business Property Relief (BPR) were once again the focus of the IHT changes.
However, the reforms introduced in this Budget could be helpful for taxpayers who may have been worried about managing their estates.
The Chancellor confirmed that any unused £1 million allowance for the 100 per cent rate of APR and BPR will be transferable between spouses and civil partners, even if the first death was before 6 April 2026.
This move is set to simplify some of the more complicated aspects of estate planning by mirroring the relief afforded by the transferable IHT nil-rate band that allows tax burdens to be absorbed by couples.
It is worth noting that the thresholds have not changed, so any value above the £1 million threshold will still only receive 50 per cent relief.
However, there will now be a 20 per cent IHT charge where the combined thresholds of the nil-rate band, residence nil-rate band and APR/BPR are exceeded.
For a couple, this means that they have an effective threshold of up to £3 million.
How will these changes impact you?
The adjustments to the handling of APR and BPR allow couples a welcome option to manage their liabilities in a simpler way.
While it might have been previously possible to restructure estates to keep IHT bills lower, any option that allows this to be done more effectively should give peace of mind to many individuals.
After the bleak changes to IHT that came in the 2024 Autumn Budget, the 2025 Autumn Budget has managed to avoid dipping back into the same pot.
As the Budget did not raid other areas of IHT, such as the much-feared changes to lifetime gifting, it is now possible for estate planning to be done more effectively.
The pressure might be on to update your affairs before April 2026 to ensure that you are fully prepared for the changes to IHT.
We are on hand to offer you expert advice on how your estate is likely to be impacted by these changes so that you can plan accordingly.
To find out more about keeping your IHT bill under control, speak to our team today!
