Draft Finance Bill Brings IHT Changes Into Focus for Landowners

The draft Finance Bill, released this week, sets the course for how the government will implement the Inheritance Tax (IHT) reforms announced in the 2024 Autumn Budget.

Despite calls for broader reform, such as the strong lobbying and alternative 'clawback' proposals presented from the NFU - particularly around Agricultural Property Relief and the treatment of land holdings - significant changes have not materialised. The government maintains that the overall financial impact on taxpayers will be limited, though this view continues to be challenged across the sector.

That said, there are some key clarifications worth noting especially for those with complex estates, family businesses or trust arrangements.

IHT Allowance to Track Inflation

From April 2030, the £1 million IHT allowance will begin rising with inflation (CPI), aiming to maintain the value of tax reliefs over time. This is in line with similar expected uplifts in the nil-rate and residence nil-rate bands. However, the limit remains strictly per person and cannot be transferred between spouses or civil partners.

Trust Planning: £1m Allowance Across All Trusts

Rather than introducing specific rules to restrict the use of multiple trusts, the draft proposes a single £1 million threshold per settlor. This allowance will be shared across all trusts they’ve created, in order of creation - meaning earlier trusts benefit first.

Pensions Brought Into Scope

A notable shift is that personal representatives will be liable for IHT on pension assets, even if they don’t control or receive those funds. Pension values will also be counted as part of the estate for IHT purposes - potentially affecting long-term planning.

With more information now available, this is a good time for landowners, farming families, and rural businesses to revisit their succession planning strategies. The proposed changes to Agricultural and Business Property Relief are set to apply from April 2026, with pension-related changes following in April 2027. Proactive steps taken ahead of the 2025 Autumn Statement could prove very valuable.

If you’re unsure how these developments might affect your plans, we’re here to help, so please contact your local Brown&Co team.

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