Autumn Budget 2025: What Bereaved Families Need to Know About Inheritance Tax

Chancellor Rachel Reeves delivered the Autumn Budget on 26 November 2025. This guide explains what was actually announced, what the rumours got wrong, and what it all means for bereaved families.

Average reading time: 12 minutes • Updated: 26 November 2025

Good News: Many Rumours Were Wrong

Despite months of speculation, the Chancellor did not extend the 7-year gifting rule, introduce a lifetime gift cap, remove taper relief, or scrap the residence nil-rate band. The main inheritance tax changes announced last year will proceed as planned.

Quick Summary: What Actually Changed

New Announcements (26 November 2025)

Infected Blood compensation exempt from IHT: All payments from the Infected Blood scheme will be free from inheritance tax, regardless of how they are passed down
APR/BPR relief now transferable between spouses: The 100% agricultural and business property relief will be transferable between married couples and civil partners
IHT digitalisation coming: Within 3-4 years, IHT form submission and payment will be fully digital
Salary sacrifice pension cap: From April 2029, only the first £2,000 of salary sacrificed into pensions will be NI-exempt (affects estate planning)

What Didn't Change (Rumours Were Wrong)

7-year rule unchanged: Gifts made more than 7 years before death remain exempt - NOT extended to 10 years
No lifetime gift cap: There is no new limit on tax-free gifts
Taper relief unchanged: The reduced tax rates for gifts made 3-7 years before death remain in place
Residence nil-rate band unchanged: The £175,000 additional allowance for family homes continues

Why This Matters for Bereaved Families

If you're administering an estate, the rules you need to follow are largely the same as before. The major changes announced in last year's Budget (pensions into IHT from April 2027, APR/BPR cap from April 2026) are proceeding as planned. No surprise changes were introduced.

Confirmed Timeline of IHT Changes

Date	Change	Status
Now	8.75% interest on unpaid IHT	In effect
Now	Infected Blood payments IHT exempt	NEW
April 2026	APR/BPR capped at £1m for 100% relief	Confirmed
April 2026	AIM shares relief reduced to 50%	Confirmed
April 2027	Pensions brought into IHT	Confirmed
Until 2030	Nil-rate bands frozen at £325k/£175k	Confirmed

Infected Blood Compensation: New IHT Exemption

One of the significant new announcements affects families of victims of the Infected Blood scandal. The Chancellor announced that all payments from the Infected Blood compensation scheme will be exempt from inheritance tax, regardless of how they are passed down.

Previously, while the initial compensation payment was tax-free, if the recipient died their family would face inheritance tax on any remaining funds. This has now been corrected.

The Infected Blood scandal saw over 30,000 people infected with HIV and hepatitis C through contaminated blood products between the 1970s and 1990s. The government has set aside £11.8 billion for compensation, with £1.35 billion already paid out.

Farm and Business Relief: Proceeding as Planned

Despite tractor protests in Whitehall during the Budget speech, the Chancellor did not announce any changes to the agricultural and business property relief reforms announced last year. From April 2026:

100% relief capped at £1 million combined for agricultural and business property
50% relief above £1 million (effective 20% IHT rate)
AIM shares will only qualify for 50% relief regardless of value
NEW: Spousal transfer - the £1m allowance will be transferable between spouses
Index-linking from 2030: The £1m threshold will rise with CPI from April 2030

For more detail on how this affects farming families, see our guide: Farm Inheritance Tax: APR and BPR Changes Explained

Pensions and IHT: April 2027 Change Confirmed

The major change bringing unused pension funds into the scope of inheritance tax from April 2027 is proceeding as planned. This remains one of the most significant changes for bereaved families.

Double Taxation Risk Remains

The government has not addressed concerns about potential double taxation on inherited pensions. If the deceased was 75 or over, beneficiaries may face both IHT (40%) and income tax (up to 45%) on inherited pension funds - potentially losing over 60% to tax.

For detailed information, see our guide: Pensions and Inheritance Tax: The 2027 Changes Explained

Frozen Thresholds Continue Until 2030

The inheritance tax thresholds remain frozen:

Nil-rate band: £325,000 per person (frozen since 2009)
Residence nil-rate band: £175,000 additional for family homes passed to descendants
Combined maximum: £500,000 per person, £1 million for married couples

HMRC collected a record £8.2 billion in inheritance tax in 2024/25, rising to a forecast £9.1 billion in 2025/26. The freeze continues to pull more estates into paying IHT each year.

For more detail, see our guide: Inheritance Tax Thresholds Frozen Until 2030

What This Means for Executors

If You're Currently Administering an Estate

No immediate changes to worry about - the rules you're following remain the same
Watch the 8.75% interest rate - delays in paying IHT remain expensive
Check for Infected Blood compensation - if the deceased received payments, these are now fully IHT exempt
Pension timing matters - deaths before April 2027 benefit from current (more favourable) rules

If the Estate Includes a Farm or Business

Deaths before April 2026: Current rules apply - full 100% relief available
Deaths from April 2026: New £1m cap applies with 50% relief above
Get professional valuations: Accurate values are critical with the new thresholds
Consider instalment options: IHT on APR/BPR assets can be paid over 10 interest-free years

Current IHT Thresholds (2025/26)

Allowance	Amount	Notes
Nil-Rate Band	£325,000	Everyone
Residence Nil-Rate Band	£175,000	Family home to descendants
Individual Maximum	£500,000	With qualifying property
Married Couple Maximum	£1,000,000	Transferable allowances
Tax Rate	40%	36% if leaving 10%+ to charity

Key Takeaways

Most IHT rumours were wrong - no changes to the 7-year rule, gift caps, taper relief, or residence nil-rate band
Infected Blood payments now fully IHT exempt - important for affected families
Farm and business relief changes proceed - £1m cap on 100% relief from April 2026, but now transferable between spouses
Pensions into IHT from April 2027 - this major change is confirmed
Thresholds frozen until 2030 - more estates will pay IHT each year
IHT receipts forecast at £9.1 billion for 2025/26 - a record high

Need Help with an Estate?

Farra helps bereaved families navigate death administration, including understanding inheritance tax obligations. Our guides break down complex tax rules into plain English, and our tools help you track what needs to be done.

Autumn Budget 2025: What Actually Changed for Inheritance Tax