How the transitional rules on IHT reliefs will impact gifts and what it means for you
Passing on your business or property to the next generation has always needed careful planning. Now, with new inheritance tax rules on the horizon, timing has become even more important. The government has announced limits on how much agricultural and business property can get full tax relief, and these will apply from April 2026. Understanding what’s changing and when could save a large amount in future taxes.
What’s changing and why it matters
In the Autumn Budget 2024, the Chancellor shared that from 6 April 2026, there will be a £1 million limit on how much agricultural and business property can get full 100% inheritance tax relief.
In simple terms, right now, there’s no limit on how much qualifying property can get full relief, but after the change, the £1 million cap will come into effect.
Because the rules are changing, HMRC has introduced transitional or anti-forestalling rules. These are designed so that gifts made before the new rules take effect may still be caught by the future limit, depending on timing and circumstances.
Gifts and the transitional rules — What you should know
Here’s a breakdown of the key scenarios for gifts involving qualifying business or agricultural property and how the transitional rules affect them:
1. If you die on or before 5 April 2026
If your death occurs on or before that date, then the “old” rules apply to your estate and to chargeable gifts. That means unlimited 100% APR/BPR relief remains.
For gifts, if they form part of your estate or are chargeable transfers, the older relief rules will apply.
2. Gift made prior to 30 October 2024 and death after 5 April 2026
Gifts made before the Autumn Budget day of 2024 are protected in that they are not counted against the future £1 million cap, even if death occurs after 6 April 2026.
That means anyone who made generous gifts of qualifying property before 30 October 2024 would still receive full 100% relief on those gifts.
3. Gift made between 30 October 2024 and 5 April 2026, and death after 5 April 2026
This is perhaps the trickiest window. Gifts made in that period may be subject to the new cap if the donor dies within seven years of making the gift. In effect, while the gift may initially qualify for 100% relief, upon death, the relief may be recalculated so that only the first £1 million of qualifying property gets the full 100% relief.
Example: you give £5 million of shares on 1 November 2025 (just after the Budget,) qualifying for BPR. If you die after 6 April 2026 and within seven years of the gift, the limit may bite.
Also note: the gift may reduce the future allowance available to your estate.
4. Gifts after 6 April 2026
From this date, the new rules are fully in force. The £1 million allowance applies to each individual (refreshing every seven years for individuals). Unused allowance cannot currently be transferred between spouses/civil partners under the draft legislation.
For trusts, there will be specific “trust allowances”, and relief at 50% will apply to qualifying property above the allowance.
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How this affects your gift and inheritance planning
What does this all mean for you if you are thinking of gifting business or agricultural property, or other assets that might qualify for APR/BPR relief?
1. Timing matters
If you made a gift before 30 October 2024, you’re in the most favourable position. Gifts in the “between” window (30 October 2024 to 5 April 2026) need careful checking, especially regarding your survival period (7 years for chargeable gifts).
2. Death within seven years counts
Even if you made the gift and paid no immediate IHT, if you die within seven years, the new cap may apply, and you may face an adjusted charge.
3. Allowance use up
Gifts in that transitional window may use up part of the £1 million allowance that otherwise would be available to your estate after 6 April 2026.
4. Trusts complicate things further
If you are setting up a trust or have a trust which holds APR/BPR property, there are separate trust allowances and anti-fragmentation rules designed to stop splitting assets among many trusts to get maximum relief.
5. Spouses and civil partners
As drafted, the individual allowance is not transferable between a married couple or civil partners. This is a factor if you rely on both partners having allowances.
6. Draft legislation – changes possible
It’s important to note that the legislation is still in draft and could change before final enactment.
How can we help you
As your accounting advisors in the UK, we’re here to help you navigate these changes and to optimise your gift- and estate-planning in the light of the transitional rules. Here are ways we can support you:
1. Advice on timing
We can review your current assets, identify which qualify for APR/BPR, and help you determine the optimal timing of gifts based on your priorities and life expectancy.
2. Modelling relief impact
We can model the impact of different gift dates (pre-30 October 2024 vs between the window vs after 6 April 2026) so that you understand potential IHT liabilities.
3. Trust structuring
If you are using trusts in your planning, we can help review the trust’s history, check whether it counts as a “pre-commencement” trust or new trust, assess available allowance and how the anti-fragmentation rules may apply.
4. Spouse/partner planning
We can advise on how to use both partners’ allowances most effectively, including will and ownership-structure reviews.
5. Estate administration support
Our team can guide you through IHT calculations, manage relief applications, and coordinate with solicitors to make sure your HMRC returns follow the right rules.
6. Keeping you updated
As the new IHT legislation may still change, we’ll keep track of any updates and let you know if your plans need revising.
Conclusion
If you’re planning to pass on business or farming assets, these new APR and BPR rules could have a big effect on your tax position. The date you make your gift could change the amount of tax due. For personal advice that helps you make the right choice, reach out to our accountants today.
Author
Mukund is a founding member of the Affinity Associates Group and has been with the practice for nearly 40 years. After completing his degree in Accounting and Finance, he went on to qualify with both ACCA and ICAEW in 1991. Over the years, he’s built deep expertise in consultancy, tax, business development, and corporate group structures. Mukund is known for helping clients make sense of complex financial challenges and turning them into opportunities for sustainable growth.
