Widespread changes were announced in last year’s Budget that affect Business Property Relief and Agricultural Property Relief, which will apply from April 2026 onwards.

Let’s start with a recap of the changes: In last October’s Labour Budget, Rachel Reeves announced that the default rate of Business Property Relief (BPR) and Agricultural Property Relief (APR) that applies to shares in trading company, and other business and farming assets, would reduce from 100% to 50%, from April 2026 onwards.

Prior to the Budget, and since the 1990s, the value of shares in unquoted trading businesses, and agricultural land and other assets used in a farming business were effectively exempt from Inheritance Tax, as many of those assets qualified for 100% relief.

However, from April 2026, each taxpayer will still be entitled to 100% relief on the first £1m of qualifying business and agricultural assets, but only 50% relief will apply to any value over £1m. Furthermore, unlike other Inheritance Tax reliefs, there is no inter-spousal transfer of this £1m band, meaning that the families of married couples that leave all assets to one another on first death, will only be entitled to 100% relief on the first £1m of assets on the second death, with no doubling up.

This, together with pensions becoming subject to Inheritance Tax from April 2027, have led to a seismic shift in Inheritance Tax planning for those affected, who now need to revisit wills and past planning, in order to minimise the impact of the changes.

Following last October’s Budget, the draft legislation was published on 21 July 2025, and this confirms how the transitional rules will apply to transfers made between Budget Day on 30 October 2024, and 5 April 2026. It also confirms how the £1m 100% band will apply to trusts.

Changes to the 100% relief allowance for individuals can be summarised as follows:

• For transfers made before 30 October 2024, the 100% rates remain unlimited if the donor dies within 7 years of making the transfer;
• For transfers made between 30 October 2024 and 5 April 2026, 100% relief is unlimited if the donor dies before 6 April 2026;
• For transfers made between 30 October 2024 and 5 April 2026, where the donor dies after 5 April 2026, but within 7 years of making the transfer, the relief will be recalculated using the 50% rates and the £1 million 100% relief allowance.

The allowance operates on a rolling seven year basis, similar to the nil rate band. When making a transfer on or after 6 April 2026, the individual must look back seven years from that date for other transfers which were relieved by BPR or APR. The amount of the allowance available is £1 million, less the amount of BPR or APR previously claimed.

Trusts do not automatically get a 100% trust relief allowance. Instead, a trust only acquires a 100% trust relief allowance if qualifying property is settled into it on or after 30 October 2024. The amount of the allowance is equal to the BPR and/or APR claimed by the settlor in settling the trusts, capped at £1 million across all trusts settled by the same settlor.

At first glance, it feels like the transitional rules have meant that making gifts of assets into trusts before 6 April 2026 aren’t worthwhile, but in actual fact that isn’t the case at all.

Let’s consider an example: Mr Giles, settles £3 million of shares in his unquoted farming company into a trust on 1 May 2026. He can claim BPR at 100% on the firm’s £1 million, with the balance relieved at 50%, resulting in an Inheritance Tax entry charge, subject to the lifetime rate of 20%. He therefore has to pay £200,000 of tax (i.e., £3 million less £1 million allowance @ 100% = £2 million less 50% relief = £1 million x 20% lifetime IHT rate). The trust will get its own 100% allowance of £1 million. He could then wait for 7 years to pass, and make a further settlement of shares into a second trust. His £1m allowance would reset and be available to him on the transfer, but the second trust will not get a 100% allowance of its own, since the settlor has already used this against the first trust. There is no 7 year reset for the trust allowance, like there is for the individual allowance.

What happens if Mr Giles transfers those shares into a trust before 6 April 2026? 100% BPR will be available on the whole £3 million, meaning no lifetime IHT is payable, saving the dry tax charge of £200,000. The trust will get its own 100% allowance of £1 million. Mr Giles’ personal 100% relief allowance is not used up, so long as he lives for more than seven years. This means he wouldn’t have to wait 7 years before transferring shares into the second trust, as his £1 million allowance will be available for any transfers from 6 April 2026 onwards, allowing him to accelerate future gifting. As above, the second trust will not get a 100% allowance of its own, since the settlor has already used this against the first trust. So that position is the same.

In conclusion, if gifts into trust are being considered to help combat the forthcoming changes to BPR and APR, then it’s well worth considering making those gifts before 6 April 2026.