The nil-rate band (NRB) is the amount of any estate that can be inherited tax free. It has remained at £325,000 since April 2009. If the deceased's estate includes a residential property that is passed to direct descendants, an additional £175,000 residence-nil-rate-band (RNRB) is available, increasing the total tax-free amount to £500,000 (or £1m if the tax-free allowance is passed to a surviving spouse).

The NRB and the RNRB had been frozen by the previous Government until 5 April 2028. This will be extended for a further two years until 5 April 2030, bringing many more estates into the scope of IHT.

Currently, unused pension funds can be inherited tax free. From 6 April 2027 amounts accumulated in a pension pot will be included in the deceased's estate and subject to IHT at 40%. This may also impact other reliefs, for example where 10% or more of the estate is left to charity in order to qualify for the lower IHT rate of 36%.

The Chancellor also announced plans to reform business property relief (BPR) and agricultural property relief (APR). From 6 April 2026, the first £1m of combined business and agricultural assets will continue to attract IHT relief at 100% but for assets over £1m, the relief will be halved to 50% relief. Assets including AIM shares that qualify for BPR and/or APR will suffer IHT at an effective rate of 20%

Contact us today to discuss how these changes might affect your succession planning.