With the recent Autumn Budget, many expected the major tax changes for the year to have already been announced.
However, just as 2025 came to a close, Rachel Reeves surprised many with an unexpected announcement on Agricultural Property Relief (APR) and Business Property Relief (BPR), increasing the allowances available to estates.
What’s changed with IHT?
One of the most debated topics in the Autumn Budget was the decision to leave certain thresholds unchanged, particularly those for APR and BPR.
These thresholds had sparked concerns since the 2024 Budget, as they were set to offer full relief only for estates worth up to £1 million, with a reduced relief of 50 per cent thereafter.
In the 2025 Budget, it was confirmed that this relief could also be passed on to surviving spouses or civil partners.
However, in a surprising move just before Christmas, the Chancellor raised the threshold to £2.5 million, effective from 6 April 2026.
This means that couples will now be able to pass on agricultural or business assets worth up to £5 million between them, in addition to other existing IHT allowances like the nil-rate and residence nil-rate bands.
What does this mean for your estate planning?
For many, this change offers a glimmer of hope in tackling what would otherwise be overwhelming IHT bills.
A frequent criticism of traditional estate plans was that they didn’t account for fiscal drag or the asset-rich, cash-poor dilemma faced by many family-run farms.
Previously, the only option for those facing substantial IHT bills was to make large gifts in the hope of surviving long enough for the tax burden to diminish.
Now, with this increase in allowances, there are more ways to manage assets without as heavy a tax burden.
Nevertheless, effective estate planning remains crucial. The forthcoming IHT reforms, such as those involving unspent pension pots, make it even more important to review your plans regularly.
For comprehensive advice and guidance on protecting your family’s financial future, get in touch with our team today.