The government has made several key changes to Inheritance Tax (IHT) including to the adminstration of death benefits through pension schemes, extending the nil rate bands for another year, and expanding the £1m combined allowance use.
As part of Budget 2025, HM Treasury committed to enabling personal representatives to direct pension scheme administrators to withhold 50% of taxable benefits for up to 15 months and pay inheritance tax (IHT) due in certain circumstances.
In Budget documents, it said personal representatives will be discharged from a liability for payment of IHT on pensions discovered after they have received clearance from HMRC.
This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2027.
Nil rate bands and combined allowance
The government also fixed IHT nil-rate bands, which were already set at current levels until April 2030, at these levels for a further year until April 2031.
This it is expected will earn a further £130m in tax receipts in the 2030-31 financial year.
The forthcoming combined allowance for the 100% rate of agricultural property relief and business property relief will also be fixed at £1m for a further year until 5 April 2031.
However, HM Treasury noted any of the allowance that is unused will be transferable between spouses and civil partners, including if the first death was before 6 April 2026.
These will be legislated for in the Finance Bill 2025-26 and take effect from 6 April 2026.
