The personal representatives will be responsible for paying any IHT due on unused pension funds and death benefits in a person’s estate. However, pension beneficiaries of registered pension schemes will be able to request the pension scheme administrator pay their IHT liability directly to HMRC in specific circumstances. They may also direct scheme administrators to withhold 50% of taxable benefits for up to 15 months. Comment The rules may potentially have significant effects for those with pension funds. For example, John made contributions to his private pension scheme. At the date of his death, aged 90, the pension fund is valued at £400,000. The remainder of his estate is valued at £1,000,000. Currently, the IHT bill is £270,000. This will rise to £430,000 under the new rules. Agricultural Property Relief & Business Property Relief From 6 April 2026, agricultural and business property will continue to benefit from the 100% IHT relief up to a limit of £1 million. The limit is a combined limit for both agricultural and business property. Such property in excess of the limit will benefit from a 50% relief. The £1 million limit applies per person and is refreshed every seven years. From 6 April 2026, this allowance will be transferable between married couples or civil partners. This will include where the first death was before 6 April 2026. There may be a further £1 million allowance for trusts in certain situations but the rules are complex. The £1 million limits for both individuals and trusts will be frozen until 6 April 2031.
Comment There has been a great deal of press reflecting the unhappiness of farmers with these changes. However, the changes are much broader and potentially affect the owners of many SMEs in the UK. Early IHT planning becomes critical under the new rules. The transferability of the allowance between spouses/civil partners seems to be recognition of taxpayer concerns. Cap for excluded property in trusts With effect from 6 April 2025, the government has retrospectively put in place a cap of £5 million for excluded property held in trust as at 30 October 2024. This cap applies to settled property which was excluded property situated outside the UK at the time of the relevant charge. The £5 million cap applies to each ten-year cycle.
Capital Taxes
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