Changes to Inheritance Tax (IHT) proposed during the Autumn Budget 2024 include significant changes to Agricultural Property Relief (APR) and Business Property Relief (BPR). Pensions will no longer be outside the scope of IHT and liable to 40%. There will be no change to the current IHT thresholds or the current rate of 40%.
The Chancellor, Rachel Reeves announced the following measures:
- IHT thresholds will be frozen until 2030.
- Inherited pensions will be liable to IHT from 2027.
- Agricultural Property Relief (APR) and Business Property Relief (BPR) will be reformed.
IHT thresholds
- The current IHT thresholds will remain in place until 2030.
- Individuals will continue to be entitled to a £325,000 Nil-Rate Band (NRB) and a £175,000 Residence Nil-Rate Band (RNRB). The RNRB remains available only if the house is inherited by direct descendants.
- The RNRB will continue to be clawed back at a rate of £1 for every £2 where the net value of the estate exceeds £2 million.
Agricultural Property Relief (APR) and Business Property Relief (BPR)
From 6 April 2025:
- APR will be extended to include land managed under an environmental agreement with the UK government, devolved governments, public bodies, local authorities and approved responsible bodies.
From 6 April 2026:
- Relief will remain at 100% on combined agricultural and business property up to a value of £1 million.
- After £1 million, the rate of relief will be reduced to 50%.
- BPR will be reduced to 50% on shares designated as 'not listed' on the markets of recognised stock exchanges, such as the Alternative Investment Market (AIM).
Inherited pensions
From 6 April 2027:
- Any unused pension funds will become part of the estate for IHT purposes and be liable to tax.
- Currently, pensions held within trust fall outside the scope of IHT. This measure aims to:
- Crackdown on pensions being used for tax planning purposes.
- Increase the number of estates liable to IHT.
- Stop individuals from accumulating wealth in a tax-free environment within their pension.
- IHT due on the pensions will be paid from the pension fund itself.
Digitalisation of IHT services
- The government aims to invest £52 million in digitalising the IHT system from 2027-28 resulting in a modern, easy-to-use service which will allow for simpler submission of returns and payment of tax.
IHT for non-UK domiciled individuals
From 6 April 2025:
- The current domiciled-based regime will be replaced with a new residence-based regime following the abolishment of the non-UK domiciled rules.
Useful guides on this topic
Autumn Budget 2024: At a glance
Our At a glance view to the Autumn Budget 2024
Our Autumn Budget 2024: Live Speech highlights
Our live feed summary of the highlights of the Chancellor's Autumn Budget speech.