Inheritance Tax
Rates
The IHT nil rate band has been fixed at £325,000 since 6 April 2009. The Chancellor extended the freeze on this figure for two further years until the end of 2029/30. Holding the threshold at the same amount for 21 years from 2009 to 2030 will bring far more people into the scope of the tax. However, the £175,000 ‘residential nil rate band enhancement’ on death transfers can reduce the impact where it applies.
A married couple may be able to leave up to £1 million free of IHT to their direct descendants (£325,000 plus £175,000 from each parent), but the rules are complicated, and the prospect of the nil rate band being fixed for another 5 years increases the importance of proper IHT planning.
Reliefs
It was widely predicted that the Chancellor would reform some of the generous reliefs that can be used to protect the value of an estate from IHT. She announced two significant changes to apply from 6 April 2026.
Agricultural Property Relief and Business Property Relief can, at present, provide a 100% deduction from the value of qualifying assets. From 6 April 2026, this will only apply to the first £1 million of total value of agricultural and business property in an estate. Above that value, the relief will be restricted to 50%.
Shares quoted on certain markets of recognised stock exchanges, such as AIM, have been eligible for 100% relief once they have been owned for two years (provided the company is a qualifying trading business). This relief will be restricted to 50% for any such shares, regardless of total value, from 6 April 2026.
Meanwhile, from 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government or other approved responsible bodies.
Pension savings
It was also widely predicted that the Chancellor would end the ability to leave a pension fund free of IHT on death. She has announced that this change will take effect from 6 April 2027: unused pension funds and death benefits payable from a pension into a person’s estate will become chargeable, restoring the position before the 2015 pension reforms.