The Giles Wilson team tuned in as Chancellor Rachel Reeves delivered the 2025 Autumn Budget yesterday. We were concerned about the rumoured changes to Inheritance Tax (IHT) and the impact that it may have on our clients. The changes, while more modest than anticipated, will have a measurable impact on some.
So, what has been announced?
- An IHT threshold freeze - The IHT thresholds were fixed until April 2030 and this will be extended for a further year to 2031. The allowances for the 100% rate of agricultural property relief (APR) and business property relief (BPR) will also be fixed until 2031.
- Permitted transfer of unused APR and BPR between spouses – Last year we saw the introduction of a cap of £1 million for the 100% tax relief under APR and BRP (applicable from April 2026). Legislation will be amended so any unused portion of this allowance is transferable between spouses, bringing the application of these reliefs more closely in line with other IHT rules.
- Clarity on IHT treatment of unused pension funds and death benefits – Another change in last year’s budget brought many unused pension funds into the taxable estate of an individual (applicable from April 2027). We learn that personal representatives will be able to direct pension scheme administrators to hold 50% of taxable benefits for a period of 15 months and settle IHT in certain circumstances. Personal representatives will also be relieved from liability for payment of IHT on pensions which are discovered after HMRC has issues IHT clearance. While helpful, it is questioned whether 15 months is long enough, particularly in complex estates.
- IHT free Infected Blood Compensation Payments - All payments made under the Infected Blood Compensation Scheme and Infected Blood Interim Compensation Scheme will be exempt from IHT. This will be the case ‘regardless of the circumstances in which those payments are passed down’. Legislation will be updated to achieve this.
In summary, the news is mixed. The IHT changes made last year are here to stay and the IHT landscape is a challenging one to navigate. Our specialist team are here to help you plan the succession of your estate with these rules in mind.
