Trusts and Inheritance Tax: What the 2026 BPR and APR Changes Mean for You

Back in our Spring newsletter we looked in detail at how Trusts can be used to help save on your Inheritance Tax (IHT) bill, alongside the proposed changes to Business Property Relief (BPR) and Agricultural Property Relief (APR).

And whilst many professionals waited with bated breath for further details, with hope that they would be changed, the details were released in July with very little revisions.

So, now that further guidance has been issued, Sam Mudd, Senior Tax Analyst takes a further look in to how the changes to BPR and APR will apply to Trusts from next year.

What are the changes?

To recap, from 6 April 2026, BPR and APR will both apply at 100% for up to £1 million of qualifying assets, with the reliefs dropping to 50% on anything thereafter. Where both APR and BPR assets are held, the £1million allowance will be prorated based on the asset value.

What does this mean for Trusts?

Trusts will largely fall into 3 categories going forward:

1. Those created before the Budget, so on or before 29 October 2024
2. Those created between 30 October 2024 and 5 April 2026
3. Those set up after the new rules are in place from 6 April 2026

Trusts created before the Budget on or before 29 October 2024 (a qualifying pre-commencement settlement)

For those pre-existing Trusts set up on or before 29 October 2024 that hold qualifying assets, the £1 million allowance will apply. However, if the qualifying property was sold prior to this date, the allowance will not be available, even if the property was held historically for a number of years.

And, after 5 April 2026, a Trust that’s entitled to the allowance will only be entitled to it up to the next 10 year anniversary date. Thereafter, the allowance will be capped at £1 million (subject to the value of qualifying assets). If assets have been settled into a number of different Trusts though, then each Trust has the potential to benefit from up to the £1 million allowance, subject to holding qualifying assets.

Trusts created and settled between 30 October 2004 and 5 April 2026

In some cases, it may be worthwhile settling assets into Trust before April when the new rules come into place. Because whilst there are transition rules, a transfer into Trust during this period will still qualify for 100% relief on the full value (i.e. in excess of £1 million) where the relevant conditions for BPR and APR are met.

The Trust will have access to a £1 million allowance going forward but it allows for significant value to be passed into Trust and the potential utilisation of a further £1million allowance. It’s also worth bearing in mind that the transitional rules mean the Trust would only benefit from a £1 million allowance, and this would apply on the first 10 year anniversary. So, whilst the qualifying assets could therefore be put into Trust, a full review would not be available on the first 10-year anniversary.

Those set up after the new rules are in place from 6 April 2026

Any Trust set up from 6 April, will be governed by the new legislation. This means that on settling any qualifying assets into Trust, the 100% BPR or APR will only be available on up to £1 million. Any value in excess of this will be subject to an immediate IHT charge, albeit benefitting from 50% relief.

Additionally, if any Trusts have previously been set up by the settlor then this will reduce the allowance available. Importantly, the relief is up to £1 million but is capped at the value transferred into the Trust.

So, if £250,000 worth of Agricultural Land is transferred into Trust the allowance will be £250,000 even if the asset doubles in value. Whilst the relief available is reduced, the potential to utilise a further £1million allowance does offer an IHT planning opportunity.

10 Year anniversary and exit charges

Certain trusts are subject to 10-year anniversary charges so it’s important to consider how the new rules will impact these too.

For example, those holding Agricultural property, which may generate low returns, could be left with cash flow issues when they need to fund a potential liability, but the value exceeds the allowance available to the trust. In summary these rules are complex, with many pitfalls and a wide range of implications.

Trusts have always been an excellent tool to protect assets whilst allowing Trustees to retain an element of control. But with the changes to reliefs, they could become an even more readily utilised tool to help mitigate IHT, especially with the April 2026 changes.

As ever, there are a number of considerations, aside from tax, that need to be taken in to account before creating a Trust, so a full review of the position will be needed.

For example, Trusts may be wound up to simplify matters and if they’ve served their purposes – such as beneficiaries reaching an appropriate age – careful consideration is needed to avoid losing any further potential benefits.

We’re here to help

The combination of your individual circumstances along with those of any Trusts in place means that each situation really is unique.

It’s vital to seek advice to understand your current position, your future potential liabilities and any opportunities to maximise the relief available.

So, whether you already have a Trust in place or you’re considering one for the future, get in contact with one of our team by calling 0330 058 6559 or email hello@scruttonbland.co.uk to discuss what works best for you.