Major Inheritance Tax Reforms: Pension, Business & Agricultural Relief Changes Confirmed
In the Autumn Statement on 30th October 2024, the chancellor made significant announcements regarding pension, business and agricultural assets and their treatment for inheritance tax (IHT).
On 21st July 2025, the government provided its first formal updates and confirmation of their intentions by issuing draft legislation.
What we know now
Despite much lobbying there are no fundamental changes to anything previously presented therefore the main points are as follows:
Pensions
Any unspent pension will form part of your estate from 6th April 2027
The responsibility for the payment of the IHT will sit with the Personal Representatives of the estate, liaising with the pension scheme providers as appropriate.
The existing principles of providing exemptions when passing the benefits to a surviving spouse, civil partner or registered charity will remain.
Payments from registered Death in Service schemes will also be outside of the scope for Inheritance Tax.
Business Property Relief (BPR) & Agricultural Property Relief (APR)
From 6th April 2026, a combined allowance of £1m will exist for BPR or APR qualifying assets, with 50% relief thereafter. These are in addition to the existing IHT thresholds and Residential Nil Rate Band.
The new £1m allowance will not be transferable between spouses of civil partners
There is provision to increase the allowance from tax year 2030/31, but this is dependent on the government at the time implementing this.
Qualifying AIM shares will receive 50% IHT relief with no allowance.
An option to settle the liability over 10 years in equal interest free instalments will be made available for IHT liabilities in respect of BPR & APR.
What Action needs to be taken?
Every family and individual will have different circumstances and now more than ever you should take advice.
Those with individual and shared business interests outside of family groups should consider the implications to their own personal circumstances and those of the business, the assets of the business and its employees.
Is your Will up to date and in respect of your pension what does the expression of wish say? Does either optimise the new allowances going forward?
Do you own property in a Self-Invested Personal Pension Plan (SIPP) or Small Self-Administered Scheme (SSAS)? Is there enough liquidity in the scheme (or estate) to enable IHT to be paid without the building having to be sold.
Should you start transferring assets or making gifts now? What are the implications of these?
Despite existing and continued lobbying, these announcements uphold the government’s position on the proposals. There may be some slight changes, but it should assume nothing fundamental will alter.
How can Prosperis help?
We have been advising individuals and businesses since 2002 and carry a wide range of knowledge and expertise to guide existing and new clients through these changes. We can also work with your existing legal and accounting professionals or where appropriate establish new relationships building our solutions into your wider plan.
Please contact your existing Prosperis adviser on 01423 223640 or advice@prosperis.co.uk, similarly if you would like to see how Prosperis can help you.