It is all eyes on the Chancellor ahead of her 2025 Autumn Budget on the 26th November. What fiscal policy changes will we see shift suddenly from speculation to regulation?

Inheritance Tax was a burning topic of discussion at the Chancellor’s last Autumn Budget in 2024, when the government announced a raft of changes to relief rates and exemptions in a bid to raise money that could help fund public services and ease borrowing figures. However, with reports highlighting that the £20 billion ‘black hole’ in public finances has since grown by a further £10 billion, clearly something isn’t working.

Given the commitments the government made to never raise income tax, VAT or National Insurance during this term of government, further reform looks unlikely. However, the clear desire to raise funds through taxation means it’s not a case of ‘will taxation change?’ but instead ‘how will taxation change?’

What are the current rules around Inheritance Tax?

In the most common cases, Inheritance Tax is charged at 40% on the value of someone’s estate at the point of death – this is only when it exceeds £325,000 (or £175,000 if a property is left to children or grandchildren). This is one of various types of ‘gifting’ you can do for Inheritance Tax relief, including donations to a charitable organisation or providing finances for a spouse.

There is also Agricultural Property Relief (APR), which grants you a 100% exemption from Inheritance Tax on the value of land and buildings used for agricultural purposes. For many years, this had no limit attached to it, but policy announcements in the last Budget saw the 100% relief restricted to the first £1 million of assets, with 50% relief being placed on anything above that total. Those changes will be implemented from April 2026, and similar restrictions will be placed upon Business Property Relief (BPR) also, with a 20% charge on inherited business assets worth over £1 million. 

The same 50% relief, which translates to a 20% charge, will be placed on the value of shares listed on the Alternative Investment Market (AIM), and the £1 million allowance will refresh every seven years, applying to any lifetime transfers in that timeframe.

A further change in the 2024 Budget saw private pensions and death benefits brought under the scope of Inheritance Tax and included within the value of someone’s estate, which will be implemented from April 2027. 

Autumn Budget 2025: Are more changes to APR and BPR on the way?

There are murmurs of the Chancellor potentially reducing APR and BPR exemption rates even further at the upcoming Autumn Budget, and there are a multitude of ways this can be done. 

There are, for example, suggestions that the seven-year rule around lifetime gifting could be extended to ten years, meaning it would take a decade for lifetime gifts to leave your estate and become tax-free. Meanwhile, other theories include possibly imposing a cap on lifetime gifting. 

These are currently all speculation, of course, but given the government’s keen focus on raising capital for public finances and growing the economy, it seems Inheritance Tax is a key strategic target for this government.

There has also been a swell of pressure on the government to impose stricter taxation on wealthy individuals, so another option we could see is the reduction of the 100% relief on APR and BPR down to around 70% on the first £1 million of an estate – though we have doubts over how much money this would raise for the country.

Financial support you can trust ahead of the Autumn Budget

It is important to note that these proposed changes are purely speculative at this time, and only once the Chancellor delivers her intentions at the Autumn Budget in November will such rumours be either quelled or confirmed. 

Making hasty decisions before anything concrete has been announced can be dangerous to your finances, so make sure you approach with relative caution.

Matthew Douglas Ltd has offered support and guidance to individuals, families and business leaders for generations, and its award-winning services have earned the trust and unwavering confidence of our clients. Whether it is savings and investments or planning your retirement, contact Matthew Douglas today for all your financial service needs.