From 6 April 2026, one of the biggest shifts in UK inheritance tax in decades will come into effect. The government’s proposed changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), including a new £1 million cap per person and updated rules for trusts, will significantly reshape how farms, family businesses and estates pass on wealth.
While the £1 million allowance headlines have dominated coverage, the real complexity — and potential opportunity — lies in the transitional rules for trusts. Whether your trust is created before or after 30 October 2024 will determine how relief is applied and how much of your estate remains protected. Acting early and planning carefully will be essential to make the most of available reliefs and avoid unnecessary tax exposure.
Trusts Created Before 30 October 2024: More Favourable Treatment
If your trust is a Discretionary Trust or a liferent trust established during your lifetime, and was set up before 30 October 2024, the draft legislation provides a more beneficial treatment under the new regime. Here’s what that means in practice:
• 100% relief still applies to assets transferred into the trust, even if the person who set up the trust dies within seven years of the transfer. These assets will not use up the £1 million allowance, leaving it available for other qualifying assets in the estate.
• The trust will not be subject to the new capped relief rules until its next 10-year anniversary (known as the TYC) on or after 6 April 2026. At that point, the trust will receive its own £1 million allowance.
• If assets are removed from the trust before the next TYC and an exit charge is triggered, they will still benefit from the current 100% relief.
• At the first TYC after April 2026, the £1 million allowance will apply only to the period from 6 April 2026 to the anniversary date. Any period before April 2026 will remain under the existing rules.
What this means: Existing trusts created before 30 October 2024 retain some key inheritance tax advantages allowing for planning opportunities ahead of the next TYC.
Trusts Created On or After 30 October 2024: Stricter Rules
Trusts created on or after 30 October 2024 will face more direct application of the new regime from 6 April 2026:
• If the person who created the trust dies on or after 6 April 2026 and within seven years of transferring assets into it, the value of those assets will reduce the £1 million allowance available to their estate.
• Any exit charge that occurs between 6 April 2026 and the first TYC will automatically fall under the new rules.
What this means: For trusts set up after the Autumn Statement, estate planning must factor in how asset transfers and death within seven years will directly affect the available relief.
Special Rules for Other Trust Types
The draft legislation also addresses the impact on several specific types of trusts:
• Bereaved children’s trusts: Each beneficiary will have their own £1 million allowance, ensuring that younger siblings inheriting later are not unfairly disadvantaged.
• Liferent trusts established under a Will: The value of the trust’s assets will continue to be added to the liferenter’s personal estate on death, and the £1 million allowance will be split between the trust and personal assets. Liferent trusts created through a Will will not receive a separate £1 million allowance.
What this means: These provisions aim to create fairness in certain family circumstances but also require careful planning to ensure allowances are used efficiently.
Why This Matters and What to Do Now
The introduction of capped APR and BPR relief — and the transitional rules surrounding trusts — represent a significant shift in how inheritance tax will apply from 2026 onwards. While the changes add complexity, they also create opportunities to optimise your estate planning and succession strategy.
At Thorntons, our specialist team advises individuals, families, landowners, and business owners on how best to navigate these changes. By reviewing your succession plans, updating your Will, and understanding trust is structured will be taxed, you can help ensure your wealth is protected and passed on according to your wishes — not dictated by the tax system.
