Autumn Budget 2025 Inheritance Tax Amendments
Published / Last Updated on 29/11/2025
The Autumn Budget 2025 did not contain any dramatic changes for inheritance taxes (IHT) but there were numerous mentions and snippets within the Budget.
Inheritance Tax Allowances Frozen
- £325,000 nil rate band (NRB) is frozen until 2030/31 and has been since 06/04/09, that’s some 22 years and given all wealth and property values have increased significantly, it means the Treasury will continue to set new records each year on IHT.
- £175,000 private residence nil rate band (RNRB) is frozen until 2030/31. It started in 2017 and has been frozen now since 06/06/20, that will be some 10 years and given that property values have and will continue to increase, it means the Treasury will continue to set new records each year on IHT.
- To much consternation from the farming community, agricultural property relief was abolished in the Budget last year and replaced by a combined agricultural and business property relief and will start at just £1m, from 06/04/26 and will also be frozen until 203/31, meaning ever increasing IHT receipts.
Change to the new Agricultural and Business Property Relief
- Transfer Unused Allowance to Spouses: Any unused agricultural and business property relief on 1st death (up to £1 million) can be transferred to the surviving spouse/civil partner on death in the same way that unused nil rate band and unused residence nil rate band can be transferred to be used on 2nd death.
- Deemed UK even if Non-UK Owned: Any UK situated agricultural property that is owned by a non-UK entity such as overseas trusts, for tax avoidance reasons, will be deemed as UK situated and fully subject to UK inheritance taxes.
Infected Blood Compensation Scheme
- From 26/11//2025 (Budget Day), payments made from the Infected Blood Compensation Scheme to a person that has already died and is therefore paid to their beneficiaries will not be subject to inheritance tax.
- From 31/12/2025, payments made from the Infected Blood Compensation Scheme to a living person that has been infected will not be subject to inheritance tax on their death provided the living recipient makes a gift or some or all of these funds to another with 2 years, otherwise the usual IHT 7 year waiting period for gifts to be outside the estate will apply.
Pensions on Death and Personal Representatives
We already know from Autumn Budget 2024 that unused pension funds will be included in our estates on death and therefore potentially subject to inheritance tax (IHT) from April 2027 and the fact that pension scheme trustees can pay the pension fund’s share of any IHT liability direct to HMRC and this has been clarified further.
- Withold 50% for 15 months: The Budget confirmed that the personal representatives (and executors if there is a Will) will be able give instructions to pension scheme trustees to withhold up to 50% of the pension fund value due to be paid to beneficiaries direct (most pension schemes are already trusts so they do not have to wait for the Will to be ‘proved’ to then distribute pension funds on death. This is designed to ensure that there are enough funds withheld to cover any share of the IHT liability.
- No Liability After HMRC Clearance: The Budget also confirmed that if the estate accounts have been finalised, any IHT bill paid and HMRC has issued ‘clearance’ to allow representatives to apply for probate/distribute the net estate and close off the estate, if there is subsequently another pension fund traced after the estate has been settled meaning more IHT is due, the government has allowed that the personal representatives/executors will not be liable for the IHT (as they are when administering the estate). The are discharged from this liability and HMRC will collect any additional IHT due from the pension scheme trustees.
