The Autumn Budget saw many individuals and businesses alike disheartened by measures that seemed to inhibit growth.
However, just before Christmas, the Chancellor made an announcement that could offer some relief for many who were fearing upcoming Inheritance Tax (IHT) considerations.
Whether you have begun estate planning yet or not, it is vital that you understand the changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) that have now been announced.
What is changing with APR and BPR?
Since being introduced in the 2024 Autumn Budget, the cap on relief offered by APR and BPR has caused widespread concern.
Under the changes, APR and BPR would only continue to offer 100 per cent relief for amounts below £1 million, after which the relief would fall to 50 per cent.
Farmers in particular were unnerved by the proposals, given that they tend to be asset-rich but low on ready cash and would likely struggle to absorb the changes.
Business owners were similarly concerned that the endeavours they worked hard to create over their lives would see their families suffer under the weight of higher IHT bills.
There was a slight glimmer of hope in the 2025 Autumn Budget when the Chancellor announced that the allowance could be passed to surviving spouses or civil partners.
Importantly, the relief could be passed along even if a spouse or civil partner died before April 2026.
While it seemed like this good news would have to be enough for the time being, the pre-Christmas U-turn has offered more hope for those dreading IHT bills.
The threshold for APR and BPR will be increased to £2.5 million when the changes take effect on 6 April.
This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate and residence nil-rate band.
How should I prepare for these changes?
While the higher threshold is good news, there is still the issue of it being more challenging to manage than the previous system, which featured no threshold.
As such, it is still important to take estate planning seriously when aiming to lower the amount of IHT that your descendants are set to pay when you die.
These changes are a precursor to future IHT reforms that will include unspent pension pots being added to an estate from April 2027.
The real good news to come from the Autumn budget remains the fact that the Chancellor did not target gifting as was feared she might ahead of time.
As such, gifting is still the best way to keep IHT bills low, as any gifts given more than seven years before you die are not counted for IHT.
Even gifts that fall within those seven years will be taxed at a tapered rate, so it remains an efficient way of estate planning.
Ultimately, the best course of action right now is to seek professional advice and support.
We can help you understand your current IHT liabilities and help you with your estate planning.
You have worked hard and it is only right that your loved ones benefit most from the assets that you want to leave to them.
Speak to our team today to secure your family’s financial future.
