The changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) offer a “clear deadline for succession planning” ahead of the new £2.5 million cap which comes into effect on 6th April, estate planning experts say.
Many business owners and their families face a greater IHT bill at death, which in some cases could spell jeopardy for the firm itself, Ian Dyall, head of estate planning at wealth management firm Evelyn Partners has warned. A sudden and unexpectedly large IHT bill, particularly where liquid assets are in short supply, could spell the end for even a successful enterprise and the jobs it provides, he added.
Commenting on the latest publication of tax receipts which show IHT tax receipts of £6.6 billion in December, £0.2 billion higher than the same period last year, Dyall explained:
“Such gradual increases in the inheritance tax take – driven by the fiscal drag effect of rising asset values taking more households’ estates above the frozen nil-rate bands – will be eclipsed in the coming few years by structural changes in IHT reliefs and rules.
“We have seen data this month revealing a significant increase in the use of trusts, with the number registered in the 2024/25 tax year amounting to 14.5% of all existing trusts. Some of this will be due to a deadline for the registration of some trusts, relating to anti-money laundering legislation.”
“But we are also seeing an increased interest in trusts among clients since the October 2024 Budget introduced not just these changes to APR/BR but also the inclusion of unspent pension assets from April 2027. As IHT nil-rate bands remain in a long-term freeze (until April 2031) and asset values increase, many more families are being drawn into IHT liabilities – a trend that will be swelled by the IHT reforms which take effect in the next 18 months.”
The steady increase in IHT receipts, which continue to grow month on month as a result of the prolonged freeze on IHT thresholds, leaves IHT as “persistent and unavoidable” issues which should not be ignored, Samantha Warner, legal director at Winckworth Sherwood said.
The sentiment was echoed by Shaun Moore at Quilter, who said the increasing receipts are reflective of a “tax system shaped by structural design choices rather than a genuine improvement in economic conditions or household finances”. He added:
“Although growth in IHT receipts can appear relatively modest month to month, the longer-term trend remains firmly upwards. With the nil-rate band frozen at £325,000, rising property values and accumulated savings are steadily pulling more estates into the tax net.
“What was once viewed as a tax affecting a relatively small minority is increasingly becoming part of mainstream financial planning, including for families who would not traditionally consider themselves wealthy.
“That pressure is set to intensify further in the years ahead, particularly with pensions due to be brought into scope for inheritance tax from 2027.”
For Will Hale, CEO of Key and Air, the figures should no longer come as a surprise – with record IHT receipts expected in 2025/26.
Given the economic challenges the UK faces and the policies being pursued by this government, Hale concluded, the government’s policy of raiding people’s wealth at death will continue to gather pace in the years ahead.
