Draft legislation has been published giving more insight into how and when proposed restrictions to two major inheritance tax (IHT) reliefs will be implemented.
At Autumn Budget 2024 the Chancellor announced plans to reform business property relief (BPR) and agricultural property relief (APR). Draft legislation published on 21 July 2025 gives more detail on how the restrictions will operate.
From 6 April 2026, the first £1m of combined business and agricultural assets will continue to attract IHT relief at 100%. For assets over £1m, the relief will be halved to 50%. This means that assets qualifying for BPR and/or APR will suffer IHT at an effective rate of 20% on what used to be tax-free. The BPR for qualifying Alternative Investment Market shares will be reduced from 100% to 50% with no £1m allowance.
According to the draft legislation the £1m limit will gradually increase over time to keep up with inflation, beginning in 2029-30 when the current 20-year freeze on the nil-rate band (NRB) is due to end.
The NRB is the amount you can pass on when you die without suffering IHT. Any unused NRB can be inherited by your spouse and added to their own NRB. Crucially, the £1m allowance for BPR and APR is not transferrable between spouses in the same way. This means that existing wills may need to be rewritten and/or assets transferred between spouses to make optimal use of the allowance. We can help you with this.
The new rules will apply to deaths from 6 April 2026, but transitional rules could affect gifts from 30 October 2024. The legislation is still in draft form and an update is anticipated in the Autumn Budget on 26 November 2025. on’t pay more tax than you need to.
