In February 2025 the government launched a consultation on how the changes to inheritance tax (IHT) Agricultural Property Relief (APR) and Business Property Relief (BPR), due to apply from 6 April 2026, will affect trusts.
Trusts and inheritance tax
As set out in our previous article, the consultation focuses primarily on property settled into relevant property trusts, which are subject to an anniversary charge of up to 6% every 10 years and an exit charge when property leaves the trust.
Our response highlights that:
- Despite the government saying that married couples could use the potential £3 million of relief available, there appear to be very limited scenarios where this would be possible.
- Some details of how the new rules will apply need clarification, such as:
- How the £1 million allowance interacts with the Nil Rate Band (NRB),
- How the rules will apply in various scenarios where multiple trusts are settled, and
- Whether an election is needed to use the allowance or if it will be automatic.
- The calculations are likely to be complex, so we would like HMRC to publish more worked examples.
- There is uncertainty around trusts being wound up that have already used the £1 million allowance, such as:
- Whether the allowance is available to future settlements by the same settlor,
- Whether it is transferred to any settlements already subsequently settled by the same settlor, or
- Whether it is simply lost.
What next?
Once the government has analysed the feedback to the consultation it will publish its response along with draft legislation for technical consultation.
How we can help
Our experts can assess the proposed changes on your existing estate and succession plans to help you minimise IHT.
If you’d like to discuss APR, BPR or IHT and trusts more widely, please talk to your usual Saffery contact or get in touch with James Stevens.
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