The position pre-Autumn 2024 Budget in relation to BPR and APR in relation to inheritance tax was as follows:

Assets that qualify for 100% relief

  • Property consisting of a business or interest in a business.
  • Control holdings of unquoted securities in a company
  • Unquoted shares in a company

Assets that qualify for 50% relief (taxed at rate of 20%)

  • Land, buildings, machinery or plant used by a company controlled by the transferor or by a partnership of which the transferor was a member.
  • Settled land, buildings, machinery or plant in which the transferor had an interest in possession and used in his business (this applied to lifetime transfers only).
  • Control holdings of quoted shares in a company.
  •  AIM shares

Reform proposed from 6 April 2026

The new allowances proposed confirm that, with effect from 6 April 2026:

  • the first £1million of combined agricultural and business property in a person’s estate will avail of 100% relief;
  • all agricultural and business property thereafter will avail of 50% relief, meaning that the remaining agricultural and business property above £1 million will be taxed at a rate of 20%;
  • if the total value of the qualifying property to which 100% relief applies exceeds £1 million, the allowance will be applied proportionately across the qualifying property. For example, if there was agricultural property of £3 million and business property of £2 million, the allowance for the agricultural property and the business property will be £600,000 and £400,000 respectively.

The assets listed in the second paragraph above that automatically receive 50% relief will not be affected by the new allowance. They will not be considered as part of the £1 million allowance of an estate and will automatically be taxed at a rate of 20%, as was the case prior to the 2024 Autumn Budget

  • The allowances extend to the following:
  • property in the estate at death;
  • lifetime transfers to individuals in the 7 years before death (“failed potentially exempt transfers”);
  • chargeable lifetime transfers where there is an immediate lifetime charge, so for example when property is transferred into trust.

The £1 million allowance for trusts

There will be a technical consultation on the proposed changes and how they relate to trusts which is expected to be published early this year. However, rules against forestalling will apply to trusts settled on or after 30 October 2024 and before 6 April 2026.

It is thought at this time that if a settlor has created more than one trust before 30th October 2024 that each trust will benefit from its own £1 million allowance for 100% relief. For trusts made by the same settlor on or after 30th October 2024, however, the £1 million allowance will be divided across all later settlements created. Each new trust will no longer benefit from a separate £1 million allowance.

The rules against forestalling also apply to lifetime transfers/gifts made on or after 30 October 2024 if the donor dies on or after 6 April 2026. For example, if a donor dies after making a lifetime gift of unquoted shares of £2 million on or after 30 October 2024, 100% relief would apply to the first £1 million and 50% to the next £1 million if the donor’s death is on or after 6 April 2026. If the donor survives 7 years, the unquoted shares would be outside of their estate and therefore would not be subject to inheritance tax.

Regulatory position

The government is set to publish a technical consultation in early 2025. This will focus on the detailed application of the allowance to lifetime transfers into trust and charges on trust property.

New legislation codifying the changes to the current regime are expected in August/September 2025.

If you would like to have a consultation with Rachel Scroggie in our Private Client team, please get in touch on Tel: 02895 442470 or email hello@turley.legal.