Decoding L-Day: Implications on Inheritance Tax and Property Reliefs

L-Day has finally arrived! And with it, some significant shifts in the landscape of Inheritance Tax (IHT) and property reliefs in the United Kingdom. But what does this mean for you? Let’s dive in. The government has confirmed that the proposed changes to IHT Business Property Relief (BPR) and Agricultural Property Relief (APR) announced at Autumn Budget 2024 will take effect from 6th April 2026. Yes, it’s some time away, but these changes are worth noting right now. The rate of relief on assets currently qualifying for 100% BPR or APR will be reduced to 50%, over and above a £1 million 100% allowance. For shares listed other than on a ‘recognised stock exchange’, the rate will drop from 100% to 50%. This includes shares listed on the Alternative Investment Market (AIM). Up until the 2029/30 tax year, the allowance for 100% BPR and APR will remain fixed at £1 million. From 6th April 2030, it will be indexed in line with the Consumer Price Index. However, it’s important to note that this allowance won’t be transferrable to a spouse or civil partner. If you’re considering making gifts between 30th October 2024 and 6th April 2026, be aware that there’ll be transitional rules affecting future tax outcomes. Lastly, trusts will see some changes too. They’ll have their own £1 million allowance, but if a settlor has transferred qualifying relievable property into more than one trust on or after 30th October 2024, a single £1 million allowance will be shared between those trusts. As you navigate these changes, it’s crucial to seek advice tailored to your circumstances to understand your potential IHT exposure and consider the next steps.

Source: kpmg.com