IHTM25521 - AR/BR 100% relief allowance: individuals - transitional provisions
Under paragraph 17(2) of schedule 12 of the Finance (No.2) Act 2025-26, the Inheritance Tax (IHT) agricultural relief/business relief (AR/BR) 100% relief allowance applies to lifetime transfers (both potentially exempt transfers (PETs) and immediately chargeable transfers when made) made before 6 April 2026 where
the transfer is made on or after 30 October 2024 but before 6 April 2026 (‘the transitional period’),
the transferor dies on or after 6 April 2026,
that death is within seven years of the transfer.
Paragraph 17(3) of schedule 12 states that the 100% allowance is treated as having effect at the date the transfer was made for the purposes of calculating the IHT due on a failed PET, or the additional tax due on the immediately chargeable transfer when made. However, under paragraph 17(4) of schedule 12 the 100% allowance will not be assumed to apply until the death of the transferor or the seventh anniversary of the transfer, whichever comes earlier.
Example
On 1 June 2025 Pauline transfers agricultural land valued at £3m to her son. The land qualifies for 100% AR and as the 100% allowance is assumed not to apply, no IHT is payable.
Pauline dies on 1 September 2028. As her death is after 6 April 2026 and the transfer was made during the transitional period and within seven years of her death, the 100% allowance is deemed to apply at the date of transfer for the purposes of the charge to tax arising on death. The 100% allowance of £2.5m is available against the transfer valued at £3m, leaving £500,000 subject to 50% AR, giving a chargeable value of £250,000. IHT at 40% will be payable on this sum, subject to the availability of the nil-rate band and exemptions, such as the annual exemption.