6 Mins
IHT Changes
This week, the government issued its response to the consultations on the proposed changes to Inheritance Tax (IHT) as outlined in the budget last October.
These changes, which revolved around Agricultural Property Relief (APR) and Business Property Relief (BPR) from 6 April 2026 and pension pots from 6 April 2027, have seen lots of conversation, discussion, and more.
With rumours of possible delays, changes, or even possible reversals of some of the changes, the response has been eagerly anticipated. However, now it is here, there are no delays or reversals. The response confirms that the changes proposed in the October budget will be introduced as planned with only some minor tweaks.
Many clients and advisors have been waiting for this confirmation to progress with planning, and while you can plan at any time, there is some planning that will be more effective if completed prior to 6 April 2026. So for those currently eligible for APR relief or BPR relief or who think they might be, make sure you look at your IHT planning now.
Usually, clients start IHT planning when they retire or shortly before. We are now reaching out to all business owners and those qualifying for these reliefs no matter what age.
As a brief reminder of what is due to change:
- From 6 April 2026, the 100% relief against IHT on qualifying APR and BPR assets will be restricted to £1 million with 50% relief above this.
- This allowance can’t be transferred to spouses.
- Shares listed on AIM will only get 50% relief with no allowances available.
- There are separate rules for trusts where the £1 million allowance can apply.
- From 6 April 2027, most unused pension pots which were previously free from IHT will now be included in your estate, with additional considerations for those over 75.
To find out more about this, why not join our webinar on Wednesday, 6 August at 12:00 where we will be recapping these changes and then focusing on what planning you should consider. This will be followed up later in September when we focus on family investment companies and trusts and their use in IHT planning.
Changes to Non-Domicile Rules
One of the major changes announced in the 2024 Autumn Budget was the tax treatment of individuals who are UK resident but not UK domiciled.
From 6 April 2025, all UK residents will be taxed on their worldwide income and gains on the arising basis, and non-domiciled individuals will no longer be able to claim the remittance basis.
Instead, the new Foreign Income and Gains (FIG) regime will apply to individuals who become UK tax resident after a period of at least 10 tax years of non-UK residence. This means that the new rules can also apply to UK domiciled individuals returning to the UK after a period of 10 or more years outside the UK. Where eligible, a claim can be made to fully exempt foreign income and gains in the first 4 years of UK tax residency.
Whilst a claim under the FIG rules will exempt foreign income and gains from UK tax, it comes with the downside of the individual being unable to deduct any foreign losses and losing their entitlement to the income tax personal allowance and the Capital Gains Tax annual exempt amount for Capital Gains Tax. Therefore, it is important to consider what is more beneficial for the taxpayer prior to making a claim, and each eligible year can be looked at in isolation. It is at the discretion of the taxpayer as to whether a claim will be made each year.
An individual can be a qualifying new resident if they arrived in the UK after 6 April 2022. The eligible years only apply from 6 April 2025 and will be adjusted according to the year of arrival.
For UK tax residents that have previously claimed the remittance basis, the government has introduced a temporary repatriation facility (TRF). This will allow previously unremitted income and gains to be brought to the UK at a low tax rate over the tax years 2025/26, 2026/27 and 2027/28.
The above is a high-level overview of some of the key changes. These rules need to be considered each year, and where a person has foreign income, double tax treaties also need to be considered.
Wedding Season
As the summer continues, and hopefully some continued good weather, we are in the most popular months of the year to get married, July and August, so it is worth revisiting some of the tax benefits for those getting married.
Inheritance Tax
For those looking to give a gift to celebrate the happy couple, did you know that this gift could also be exempt from Inheritance Tax (IHT) up to certain amounts?
Aside from an individual’s annual exempt amount each year of £3,000, further gifts can be given upon marriage. These are:
- £5,000 to a son or daughter by their mother or father.
- £2,500 to a grandchild from their grandparents or great-grandparents.
- £2,500 from the bride to groom or vice versa before the marriage.
- £1,000 to any other person.
It is worth noting these gifts are per marriage/civil partnership, so for example, a mother could not give £5,000 to their son and then make a gift of £1,000 to the bride.
This does not limit the amount of the gift allowed; however, any amounts gifted more than the above exemption limits will be considered a potentially exempt transfer for IHT.
Income Tax
For those recently married or in a civil partnership, the marriage allowance allows for 10% of one person’s personal allowance to be transferred to their spouse/civil partner.
This can save up to £252 per year in tax. This can be useful if either the husband or wife’s income is covered by their personal allowance. However, this is only available if both individuals are basic rate taxpayers (or intermediate rate in Scotland). Should either husband or wife be a higher rate taxpayer, the marriage allowance is not available.
For those in self-assessment, this can be claimed within your tax return, and both husband and wife need to claim. If you are not in self-assessment, this can still be claimed by contacting HMRC.
Capital Gains Tax
Another useful tax benefit can be for capital gains tax. Assets can be passed to your spouse/civil partner at no gain/no loss. Your spouse will then take on the original base cost of the assets gifted.
By passing some or all value in an asset, when selling in the future this can make use of both spouses’ annual exemptions and possible lower rates of tax depending on income levels. However, where property and shares are involved, this could lead to additional costs to change legal ownership.
Gifts transferred between spouses will also not be subject to any IHT as these are exempt.
Join our IHT webinar
Why not join our webinar on Wednesday, 6 August at 12:00 where we will be recapping the Inheritance Tax changes and then focusing on what planning you should consider. This will be followed up later in September when we focus on family investment companies and trusts and their use in IHT planning.