BPR, APR, and pensions: Draft Inheritance Tax changes explained

The 2024 Autumn Statement proposed significant reforms to pensions, Inheritance Tax (IHT), and key reliefs such as Business Property Relief (BPR) and Agricultural Property Relief (APR). Since then, draft legislation has been published, clarifying how these changes may work in practice.

From April 2026 and April 2027, new rules will reshape the treatment of pensions and reliefs, creating major implications for estate planning and estate administration. In this blog, we break down the key updates, including what’s changing, when, and what it means for individuals and professionals.

BPR & APR Legislation update

Current rules

At present, Business Property Relief (BPR) and Agricultural Property Relief (APR) can provide up to 100% relief from IHT, with no maximum value cap.

What’s changing from 6 April 2026

The draft legislation introduces a new framework:

• A £1 million allowance will apply to the combined value of property in an estate qualifying for 100% BPR or APR.

• Any value above £1 million will attract relief at 50%, meaning 20% IHT rather than 40%.

• Combined with existing Nil Rate Bands (Nil Rate Band (NRB), Residential Nil Rate Band (RNRB), Transferable NRB, and Transferable RNRB, a couple could pass on up to £3 million tax-free.

• A £1 million allowance will also apply to agricultural and business property held in Trusts.

• Quoted vs unquoted shares:

  • Relief for shares on the AIM market will reduce from 100% to 50%.

  • The same reduction applies to shares listed on foreign exchanges that are not recognised stock exchanges.

• The option to pay IHT in ten annual instalments interest-free will be extended to all property qualifying for BPR or APR.

Implications for estate planning

These changes significantly reduce the tax advantages of certain business and agricultural assets. Families, landowners, and entrepreneurs should review existing arrangements to ensure they remain tax efficient. Professional advice will be vital in restructuring estates before April 2026.

Pension legislation update

Current rules

At present, Trustees have discretion over pension death benefits, meaning they do not normally form part of the estate for IHT purposes. This has made pensions one of the most tax-efficient ways to pass on wealth.

What’s changing from 6 April 2027

The draft legislation sets out significant reforms:

• Personal Representatives (PRs) will take responsibility for obtaining valuations of unused pensions and paying the tax due. Previously, it was expected that this duty might fall to pension companies.

• A “relevant death benefit” has been defined to include:

  • A pension death benefit

  • A lump sum death benefit

  • An annuity

    Exclusions: dependants’ scheme pensions and death-in-service benefits.

• PRs will need to collect and report information from all of the deceased’s pension schemes. While PRs would have previously contacted pension providers to confirm information for Income Tax reviews, they will now need to ensure they obtain details for the IHT account and allocate the IHT attributable to each scheme.

• Scheme administrators must pay the tax to HMRC within three weeks, introducing tighter deadlines, but is it realistic?

Implications for estate administration

These changes will create more work for PRs, who will need to liaise with multiple pension providers, calculate the IHT liabilities, and ensure compliance within strict timeframes. It also shifts liability risks away from pension companies and onto the estate, highlighting the importance of professional advice.

What this means for Will Writers and Financial Advisers

These reforms will directly affect how professionals advise clients:

• Will Writers will need to consider pensions during Will drafting when establishing the value of their clients' estate.

• Financial Advisers will need to review retirement and succession strategies, including pension withdrawals, alternative investment vehicles, and BPR/APR planning.

• Collaboration between Advisers and Will Writers will become even more important to ensure clients’ estates are structured effectively and compliant with the new legislation.

Conclusion

The Draft Legislation following the 2024 Autumn Statement marks the most significant shift in pensions and reliefs for over a decade. With changes to take effect in April 2026 (BPR & APR) and April 2027 (pensions), the impact on estate planning will be substantial.

Personal Representatives will face greater responsibility for pension reporting, while the new allowances for BPR and APR could alter the way families plan succession.

Now is the time for individuals and professionals to review estate plans and prepare for the upcoming changes. Read more details of HMRC’s technical consultation on pensions here: Inheritance Tax on pensions: liability, reporting and payment – GOV.UK

Kings Court Trust is a probate and estate administration provider that offers award-winning solutions to support every family. Whether you need a hand obtaining the Grant of Representation, completing the complicated tax and legal work, or anything in between, you’re in safe hands with our team of specialists.

If you have any questions about the estate administration process, including applying for the Grant of Probate, call our Client Services Team on 0300 303 9000 or click the 'Chat with a Specialist' button at the top of the blog.