There are few who felt that the Autumn Budget represented a positive step for individuals and business owners who were already struggling to keep pace with economic challenges.
As a gift to those dreading mounting Inheritance Tax (IHT) bills, the Chancellor gave an early Christmas present in the form of updated thresholds for Agricultural Property Relief (APR) and Business Property Relief (BPR).
If you have not yet updated your estate plans, it is important that you factor in these new changes and how they will impact you.
How are APR and BPR going to change?
First announced in the 2024 Autumn Budget, the previously generous relief offered by APR and BPR will be capped.
The proposals set the threshold for 100 per cent relief to £1 million, with any amount above that only benefiting from 50 per cent relief.
It has been widely noted that farmers were most likely to feel the negative impact of the change, given that their wealth tends to be tied to vital assets that cannot easily be disposed of.
Business owners were similarly faced with the prospect of losing value in the enterprises that they had spent years crafting.
A slight indication of a softening stance came when the 2025 Autumn Budget permitted the allowance to be passed to surviving spouses or civil partners.
Even if one spouse or civil partner died before April 2026, the relief could still be passed along.
This goodwill was further extended with the surprising pre-Christmas U-turn that saw the thresholds change to better capture the financial realities of the current economy.
The threshold for APR and BPR will be increased to £2.5 million when the changes take effect on 6 April.
This means that a couple will be able to pass on up to £5 million of agricultural or business assets between them, on top of the existing allowances such as the nil-rate and residence nil-rate band.
What do I do to prepare for these changes?
While the changing of thresholds is a good thing and will provide more scope for managing finances, it does little to distract from the fact that the thresholds are new.
This means that estate planning is still going to be necessary if you know that your estate is likely to be liable for IHT.
Alongside this, 2026 is also the last year when pensions are safe from the threat of IHT.
From April 2027, unspent pension pots will be included in IHT calculations and this may push more people into paying tax.
As such, this year is still the year when effective estate planning is necessary.
One of the best ways to do this is with gifting, as the Chancellor mercifully left gifting alone in the Autumn Budget.
As such, you should endeavour to use gifting where possible, as gifts given seven years before your death fall outside of IHT.
Even gifts that fall within those seven years will be taxed at a tapered rate, so it remains an efficient way of estate planning.
To make sure your 2026 is getting off to a good start, be sure to seek professional advice and support.
We can help you understand your current IHT liabilities and help you with your estate planning.
Knowing your position will allow you to better protect the assets you have worked hard for so that your loved ones can make the most of them when you’re gone.
To make sure that you know how to manage your IHT liabilities, speak to our team today.
