Unsurprisingly, the Nil Rate Band (NRB) and Residence NRB (RNRB) have been frozen until 2030/31. This means the NRB will have been at its current £325,000 level for over 20 years.
Not announced by the Chancellor in her speech, but included within the Budget notes were some anti-avoidance measures:
- Offshore companies and similar structures that own UK agricultural land and buildings will be transparent for inheritance tax purposes, following the existing treatment for UK residential property;
- The inheritance tax charity exemption will be restricted (from 26 November 2025 if made during lifetime and 6 April 2026 if made on death) to gifts made directly to UK registered charities and community amateur sports clubs (CASCs). Gifts to trusts for charitable or registered club purposes will no longer qualify unless they also meet jurisdiction and regulatory requirements; and
- An inheritance tax charge will apply if a settlor ceases to be a long-term UK resident and situs rules are manipulated, so that trust assets are changed from UK to non-UK situs to avoid an exit charge, effective from 6 April 2025.
However, there were some changes to the transitional rules for excluded property trusts in place before 30 October 2024.
These trusts were already excluded from inheritance tax on the death of the settlor, even if he or she had become a long-term resident, and from 6 April 2025 were only subject to a periodic charge of up to 6% every ten years and proportionate inheritance tax exit charges between ten-year anniversaries if the settlor had become a long-term resident or was a long-term resident at death.
Included in the Budget notes, a new measure limits the amount of tax every ten years to £5 million, with a pro-rated for the period from 6 April 2025 to the first ten-year anniversary based on the number of complete quarters since 6 April 2025. This measure applies for each trust and is retrospective, so will apply to ten-year and exit charges that have already occurred. In practice, this relief will only make a difference to affected trusts with assets in excess of £83 million.
The Chancellor also extended inheritance tax reliefs for compensation payments from the Infected Blood schemes to the first living recipient where the person eligible for compensation had already died. The first living recipient will be given an inheritance tax credit on the compensation amount, which can also be available if they give some or all of the compensation away within two years of receipt.