IHT New Rules – What Will 2025 Bring for Inheritance Tax?

As we move into 2025, families and estate planners are watching closely for potential changes to Inheritance Tax (IHT). With the 2024 Budget introducing major reforms—including new rules for AIM shares, farmland, and pensions—many are wondering what further adjustments might be on the horizon.

So, what will 2025 bring for Inheritance Tax? And how can you prepare?

1. No Immediate Cuts to Inheritance Tax

There has been widespread speculation about Inheritance Tax being scrapped or reduced, particularly ahead of the next general election. However, as of early 2025, the 40% IHT rate remains unchanged, and the tax-free thresholds continue to be frozen.

🔹 Nil-Rate Band remains at £325,000 – This has not increased since 2009 and is now set to stay at this level until at least 2028.

🔹 Residence Nil-Rate Band (RNRB) remains at £175,000 – Allowing a couple to pass on up to £1 million tax-free if their main home is left to direct descendants.

🔹 More estates will be taxed – Due to frozen thresholds and rising property values, more families than ever are now caught by IHT.

2. AIM Shares – Stricter Rules in 2025

One of the biggest IHT planning tools—AIM-listed shares—was restricted in 2024, and further rule tightening is possible in 2025.

🔸 Fewer AIM shares qualify for Business Relief (BR) – Previously, many AIM shares were exempt from IHT if held for two years. However, the government has cut the number of qualifying businesses, meaning more AIM investments will now be subject to 40% IHT.

🔸 Investors need to review their portfolios – Those who used AIM shares for IHT planning should reassess whether their investments still provide tax benefits.

3. Farmland – Agricultural Relief Under Review

The 2024 Budget restricted Agricultural Property Relief (APR), and further rule changes in 2025 may affect who qualifies for tax relief on farmland.

🔸 Landowners who don’t farm actively may lose APR – If you own farmland but do not personally farm it, you could face a 40% IHT bill on that land.

🔸 APR rules may be reviewed again in 2025 – As the government looks to close tax loopholes, farmland relief could be further limited.

4. Pensions – Now Included in Inheritance Tax

One of the biggest IHT changes from 2024 was the introduction of Inheritance Tax on pension pots.

🔸 Pensions are now part of the taxable estate – Previously, pensions were exempt from IHT, but they are now counted towards the estate’s total value.

🔸 This could push more estates over the tax-free threshold – Many families who expected to pass on pensions tax-free may now face unexpected IHT bills.

🔸 More pension planning is needed in 2025 – If you’re relying on a pension to pass wealth tax-efficiently, you may need to explore alternative strategies.

What Can You Do to Reduce Inheritance Tax in 2025?

As IHT rules tighten, estate planning is more important than ever. Here are some key strategies:

✔️ Review your AIM investments – If you hold AIM shares, check whether they still qualify for Business Relief.

✔️ Assess farmland eligibility – If you own agricultural land, ensure it still qualifies for APR under the new rules.

✔️ Plan for pension taxation – With pensions now part of IHT calculations, consider alternative ways to pass on wealth, such as gifting or trusts.

✔️ Use tax-free gifting – You can still give away £3,000 per year tax-free, and larger gifts may be exempt if you survive for seven years.

✔️ Consider trusts and estate restructuring – Using trusts can help manage assets and potentially reduce tax liability.

What Will 2025 Bring for IHT?

While there were no major IHT cuts in 2024, the frozen thresholds, AIM share restrictions, farmland rule changes, and pension taxation mean more estates will be affected in 2025. With a general election on the horizon, the future of IHT remains uncertain—but for now, the best approach is proactive planning.

If you’re concerned about how these new rules will impact your estate, now is the time to review your plans, explore tax-saving options, and seek professional advice to ensure your wealth is protected for future generations.