Autumn Budget Changes to Business Relief

The 2024 Autumn Budget announced changes to the IHT relief available for assets qualifying for Business Relief (BR) and Agricultural Relief (AR). The qualifying conditions themselves have not changed but the amount of relief will be capped. The first £1 million of qualifying assets will be exempt from IHT and the excess will attract 50% relief (in effect producing a 20% tax rate). The £1m will be shared across assets qualifying for BR and AR on pro-rata basis. Another change is that listed shares treated as unlisted shares, e.g. AIM listed, will qualify for 50% rather than 100% IHT relief from 6 April 2026. A Consultation is expected to commence in early 2025 but we anticipate this will largely be on administrative matters rather than anything that would fundamentally change the proposals.

Reform of the rules applying from April 2026

From April 2026, the first £1 million of combined agricultural and business property will continue to receive 100% relief, with 50% relief on amounts over £1 million. Business relief for shares that are not listed on a recognised stock exchange, which includes AIM shares, will reduce to 50%. The £1m allowance does not apply to these shares. Assets that receive 50% relief are subject to an effective IHT rate of 20%, as opposed to the main rate of 40%. The £1 million will effectively be a ‘lifetime allowance’, covering the estate on death, failed gifts in the seven years before death and lifetime transfers into trust. Any unused allowance will not be transferable between spouses.