Draft Legislation is Issued
At the October 2024 Budget, the government announced major upcoming changes to IHT. Following months of lobbying and consultation, the draft legislation confirms that from 6 April 2026, business property relief (BPR) and agricultural property relief (APR) will be restricted.
The government has apparently rejected calls for significant changes to be made to the proposals or to delay their introduction. The draft legislation largely mirrors the original proposals. Though it is still just about possible that the final legislation may change, as the draft legislation is now subject to technical consultation for an 8-week period; this normally represents an exercise in tinkering with little meaningful change, rather than a substantial rewrite.
The APR and BPR changes are expected to raise around £0.5billion in additional tax receipts in 2027/28.
The interest free instalment payment option will be extended to all APR and BPR qualifying property. Whilst easing cashflow, the instalment option increases risk for personal representatives as should an asset be transferred to a beneficiary who fails to pay the tax, the personal representatives remain liable. Estates are likely to remain in administration for much longer, as we can also likely expect an increase in HMRC checking valuations in considerable detail that may not previously have been necessary, potentially adding cost and frustration for beneficiaries at an already difficult time.
It doesn’t have to be like this.
Time for Action
After decades of procrastination under the existing framework, business owners now have limited time to set their affairs in order ahead of the changes.
Business owners and their advisers will doubtless be spending the coming months considering the detail of the draft legislation. Taxpayers should be reconsidering their IHT position in light of these changes and would be wise to obtain valuations and reassess tax planning strategies they may have in place as soon as possible.
HMRC’s notification and draft legislation was published on 21 July 2025. It may be found at:
