Inheritance tax reliefs on businesses and farms: Autumn Budget 2025 update

The recent Budget brought no fundamental change to the Government’s policy of capping inheritance tax business property relief (BPR) and agricultural property relief (APR). The overall policy remains that, with effect from 6 April 2025, individuals and trusts will benefit from relief at 100% on the first £1m by value, with 50% relief on all value above that. (But there is a lot of detail behind that, especially for trusts, so please take specific advice if this affects you.)

What is changing?

There was a change announced in the Budget, in that the £1m allowance will now automatically transfer between a couple who are married or in a civil partnership. This is an obvious and welcome simplification of the rules which removes the need for some couples to make specialised Wills to capture the allowance when the first of the couple dies. 

Perhaps even more welcome is confirmation that where the first death took place before 6 April 2026 there will be an automatic assumption that a full allowance has transferred to the surviving spouse. Under the previous version of the new rules anyone who was already a widow, widower or surviving civil partner would only ever have had one £1m allowance. 

Until we see revised draft legislation, there are still questions over precisely how the transfer will work, especially in cases where the first death is after 5 April 2026 and the first to die owned no business or farm property.

Is there anything I should be doing now?

It is still sensible for business owners and farmers to review their Wills to make sure that they work as intended. Many will have been made at a time when full tax relief meant that substantial legacies to someone other than the surviving spouse made sense. The changes to BPR and APR could mean unexpected tax bills for people with older Wills. Older Wills should be checked to make sure that the burden of tax falls as intended. 

Those couples relying on the inheritance tax “residence nil rate bands” to pass on a total of £3m tax free (see my blog Smaller farms, inheritance tax, the £3m claim and the residence nil rate band - Burges Salmon) need to be especially careful to organise their affairs to capture the available allowances. The residence nil rate bands are worth up to £350,000 tax free to a married couple but are tapered away for anyone with assets worth over £2m. Crucially, that £2m figure is the value before BPR and APR are applied. See the blog linked above for an example of how this becomes a problem and what to do about it.

It is also important to review property ownership. Couples should still consider carefully with a tax advisor whether to make sure that each of them has at least £1m of assets which could qualify for BPR or APR. Where a large gift is needed to make that happen, the giver should consult a family lawyer to see whether a “post-nup” agreement would be right for them, when considering asset protection.

More information

Burges Salmon has deep expertise advising on all legal and tax issues for those looking to pass on businesses and farms. Our hub Tax reform: BPR and APR - Burges Salmon contains a series of guides tailored to entrepreneurs, family business owners, landowners, trustees and their professional advisors. There is also a series of in-depth articles looking at various aspects of the changes.