At the end of July, the Government issued the long-awaited draft tax legislation for the proposed changes to inheritance tax, first announced in the Budget last October. Despite much lobbying, from farming groups in particular, the changes seem to be going ahead pretty much as originally announced.
Since then, there has been almost daily speculation in the media regarding what further changes for inheritance tax could be on the way in the Budget later this year, with a cap on lifetime gifting, potentially from Budget Day itself, being given as one of the options, another being a simple increase in the tax rate.
What does this mean?
With the changes already announced and potentially more on the way, it is important for everyone to consider their inheritance tax position so that the liabilities can be understood and planned for.
All business owners, as well as all farmers and landowners, particularly need to understand the potential impact for them of the restriction to Business Property Relief and Agricultural Property Relief from 6 April 2026.
In short, anyone with qualifying business assets (trading businesses) and farming assets, with a combined value of over £1m, needs to expect to be paying more inheritance tax from 6 April 2026 due to a restriction on the reliefs currently available on these assets.
Additionally, from 6 April 2027, unspent pension pots will fall within the scope of inheritance tax. This will potentially affect everyone with a personal pension.
These changes, taken together and added to the freezing of the inheritance tax Nil Rate Band at £325,000 since 2009, could mean a significant increase in potential future tax liabilities – even before any possible further changes are announced in the Autumn.
How can we support you?
If you think these changes could affect you, you should seek professional advice to ascertain the financial impact and to find out what planning opportunities are available to mitigate the tax.
Here at BHP, we have a large and highly experienced tax team that can advise on this and other tax matters. We are also independent financial advisors, allowing us to discuss your pension and potential planning options with you.
If you are concerned, please don’t hesitate to contact us. There are still many ways to reduce the inheritance tax burden, and we’re here to help.
We will be holding an in-person event to review the changes and discuss potential planning opportunities, shortly after the Autumn Budget which is likely to be late October / early November. If you would like to receive an invitation, please send your details here.
