Inheritance tax measures 

The measure

The government has made a number of announcements related to the inheritance tax regime.   

Nil-rate band thresholds  

The current nil-rate band of £325,000 and residence nil-rate band of £175,000 will remain frozen for a further year until 5 April 2031. The £1m combined allowance for agricultural property relief (‘APR’) and business property relief (‘BPR’) will also remain frozen for a further year until 5 April 2031.  

Unused allowance for APR and BPR 

The £1m allowance (or unused element) for APR and BPR assets will now be transferable to a spouse or civil partner on death, including circumstances where the first death was before 6 April 2026. This means that if an individual dies and owns less than £1m of relievable assets, the unused allowance can be transferred to a surviving spouse or civil partner. 

Inheritance tax anti-avoidance 

The government intends to make changes so that UK agricultural property held by non-UK entities will be treated as UK-situated for inheritance tax purposes, increasing tax liabilities for certain non-UK long-term residents and associated trusts. This change is to take effect from 6 April 2026.  

Where a settlor ceases to be a long-term UK resident, there will be an inheritance tax charge if there is a later change in situs of their trust assets. 

The inheritance tax charity exemption will be restricted to gifts made directly to UK charities and registered clubs, and excluded from gifts to trusts which are not registered as UK charities or clubs. 

Capping inheritance tax trust charges for excluded property in trusts 

A £5m cap will be applied to relevant property trust charges on excluded property trusts that were set up before 30 October 2024. This is relevant to individuals and associated trusts who were non-UK domiciled under the rules that applied before 6 April 2025. The cap will apply to trust inheritance tax charges from 6 April 2025 (i.e. the cap is backdated). 

Inheritance tax and pensions 

Personal representatives will be able to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay inheritance tax due in certain circumstances. Personal representatives will be discharged from a liability for payment of inheritance tax on pensions discovered after they have received clearance from HMRC. 

Who will be affected?

Thresholds: Individuals whose estate and qualifying residence value exceeds the respective nil-rate bands, or who make lifetime chargeable transfers, plus trusts that are subject to periodic inheritance tax and exit charges.   

Reliefs reform: Individuals and trusts with assets that qualify for APR and BPR. 

Excluded property trusts changes: These changes will apply to trustees where the trust settlor is internationally mobile. Under the current tax rules, foreign assets owned by trustees may be excluded property if the settlor is not a long-term UK resident.  

Pensions: The announced changes are relevant to personal representatives, pension providers and individuals who are considering the administration of their estate.  

When will the measure come into effect?

BPR and APR changes apply from 6 April 2026. 

The anti-avoidance measure will apply to trust exit charges from 26 November 2025, gifts to charities in lifetime from 26 November 2025 or on a death from 6 April 2026, and for UK agricultural property from 6 April 2026. 

Capping inheritance tax trust charges for excluded property in trusts will apply from 6 April 2025. 

Inheritance tax and pensions changes will take effect from 6 April 2027.