From 6 April 2026, 100% APR and BPR will be subject to a lifetime allowance. Where the combined value of qualifying business and agricultural assets exceeds the lifetime allowance, the excess amount will attract APR/BPR at the rate of 50%. The original policy intention was for the allowance to be set at £1m. However, on 23 December 2025, the government announced that the allowance will be increased to £2.5m. This allowance will be available to both individuals and trusts.
The government’s IHT reforms, which were first announced at the Autumn Budget 2024, have been subject to criticism. This latest development follows earlier concessions made by the government, including making the allowance transferable between spouses/civil partners. The development of the policy is summarised in the timeline below.
Increasing the allowance to £2.5m means that couples will be able to benefit from APR and BPR of up to £5m, on top of other allowances, including the nil rate band. It is stated in the press release that this will also be the case for “people who are widowed and have lost spouses or civil partners before the policy was introduced”. This mirrors the existing provisions that allow the unused nil rate band and residence nil rate band to pass to the surviving spouse or civil partner.
The government says the increase in the allowance will “significantly reduce the number of farms and business owners facing higher inheritance tax bills under the reforms, ensuring that only the largest estates are affected”. Further details are expected to be announced in January when the change is introduced to the Finance Bill 2025-26.
ICAEW’s view
Katherine Ford, Technical Manager – Personal Taxes, ICAEW, said: “ICAEW welcomes this change, having repeatedly asked for the £1m allowance to be increased since it was first announced. However, it is disappointing that the government has taken so long to listen to and act on the concerns of business owners and farmers, causing unnecessary confusion, frustration and distress. We will continue to engage with the government to ensure that the legislation works as intended”.
Timeline
| 30/10/2024 | Government announces measures to reform IHT, including changes to APR and BPR, at the Autumn Budget 2024 (ICAEW article). |
| 23/04/2025 | ICAEW publishes ICAEW REP 30/25, warning that the government’s plans may have severe consequences for farms and other businesses (ICAEW article). Recommendations made by ICAEW include increasing the £1m allowance for 100% APR and BPR and making it transferable between spouses. |
| 21/07/2025 | Government publishes draft legislation for Finance Bill 2025-26 (ICAEW article). In a change from the original proposal, the legislation provides for the allowance for 100% APR and BPR to be increased in line with inflation from April 2030. |
| 15/09/2025 | ICAEW publishes ICAEW REP 68/25 in response to the draft legislation, expressing disappointment that the only change made by the government is the inflationary increase from 2030 (ICAEW article). |
| 20/10/2025 | ICAEW gives evidence to the House of Lords Finance Bill Sub-committee, repeating its call for the government to reconsider its proposals (ICAEW article). |
| 27/11/2025 | Government announces at the Autumn Budget 2025 that the allowance for 100% APR and BPR will be transferrable between spouses (ICAEW article). The government also extends the period during which the allowance will be fixed at £1m by one year to 2031. |
| 04/12/2025 | Finance Bill 2025-26 published (TAXguide 05/25). |
| 23/12/2025 | Government announces that the allowance for 100% APR and BPR will be increased from £1m to £2.5m. |
| 06/04/26 | The reforms are expected to apply with effect for transfers or occasions of charge from this date. |
Further information
ICAEW on the Budget
LATEST ON INHERITANCE TAX
The Tax Faculty
ICAEW's Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
Further resources
Latest news
TAXwire and Tax Track
Stay up to date with the latest developments by signing up to the Tax Faculty's weekly enewsletter and listening to the Tax Track podcast series.
Listen now Newsletter sign upPractical guidance
Tax Faculty resources
The Tax Faculty offers expert guidance and support enabling you to provide the best advice on tax legislation to your clients or business. We offer clear direction in taxing times. Membership is open to everyone.
ICAEW support
Training and events
Browse upcoming and on-demand ICAEW events and webinars focused on developments in tax practice and policy.
Events and webinars CPD courses and more