Transferable IHT allowance “makes sense” for farmers
The Budget decision to make the £1 million inheritance tax allowance for agricultural and business property transferable between spouses “makes sense” for farmers and business owners, says the Association of Taxation Technicians.
The Chancellor confirmed yesterday1 that the allowance for 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) for inheritance tax will be able to transfer between spouses and civil partners when it is introduced in April next year. This brings it in line with the existing Nil Rate Band (NRB) and Residential Nil Rate Band (RNRB).
The ATT had warned that failing to do so would cause problems for farmers and small business owners, who may have been forced to consider complicated trust planning otherwise.
Jon Stride, Chair of ATT’s Technical Steering Group, said:
“This announcement will not be what many farmers and business owners wanted but makes sense to help to make the policy more workable, particularly for smaller businesses. We had called for this change ahead of the Budget as, without it, many would have been forced unnecessarily into more complex planning involving trusts to ensure allowances were not wasted.
“The provision for an extra allowance where the individual’s spouse or civil partner has died prior to 6 April 2026 is very welcome. This brings the introduction of the new £1 million allowance in line with the transitional measures for deceased spouses when the residential nil rate band was introduced.”
The Chancellor also announced yesterday another extension to the freeze of the nil rate band. It had been confirmed last year that the NRB would be held at £325,000 until April 2030, with Rachel Reeves saying yesterday this would be extended another year until April 2031.
Jon Stride said:
“The NRB was last increased in April 2009, meaning that by April 2031 the NRB will have been frozen for 22 years. This is not so much fiscal drag as fiscal immovability.
“Despite this prolonged spell in the freezer, 22 years is still only a light chill in IHT terms, with some of the gift allowances effectively now part of the permafrost.
“The annual £3,000 gift allowance was last increased in 1981, the small gifts allowance of £250 in 1980 and the various allowances on the occasion of marriage have been unchanged since 1975.”
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