What Inheritance Tax Reliefs Are Currently Available? A Guide to Protecting Your Estate in 2025

Belgravia Capital
May 31
4 min read

Updated: Jun 2

If you’re planning your estate or managing a loved one’s, one of the smartest questions you can ask is:

“What inheritance tax reliefs are currently available?”

Inheritance tax (IHT) in the UK is charged at 40% on the value of an estate above certain thresholds.

But a range of reliefs and exemptions can reduce, or in some cases completely eliminate, the tax due.

At Belgravia Capital Wealth Management, we help families understand which reliefs they qualify for and how to structure their estate to make full use of them.

In this article, we break down the most important IHT reliefs available in 2025, and how they could help protect your wealth before further rule changes reduce their impact.

1. Nil-Rate Band (NRB) – £325,000

The nil-rate band is the standard inheritance tax allowance available to everyone in the UK.

The first £325,000 of an individual’s estate is tax-free.
The remaining estate is taxed at 40% (unless other reliefs apply).
This allowance has been frozen since 2009 and is now locked until 2030.

Transferable NRB:

If you’re married or in a civil partnership, any unused NRB can be transferred to your spouse or partner when you pass away. That means a couple can effectively leave £650,000 tax-free.

2. Residence Nil-Rate Band (RNRB) – £175,000

Introduced in 2017, the residence nil-rate band is an additional allowance for people passing on their main home to direct descendants (e.g. children or grandchildren).

Worth up to £175,000 per person
Combined with NRB, individuals can pass on £500,000 tax-free
Couples can pass on up to £1 million

Tapering:

If your estate is worth more than £2 million, the RNRB is reduced by £1 for every £2 above that threshold, disappearing completely at around £2.35 million.

This makes careful asset planning essential for larger estates.

3. Business Property Relief (BPR) - Up to 100%

Business Property Relief can significantly reduce IHT on qualifying business assets.

What qualifies:

Sole trader businesses
Interests in partnerships
Shares in unlisted companies (including AIM-listed shares — until April 2026)
Machinery, buildings and land used in the business

Relief available:

100% relief if you own a qualifying business or shares in one
50% relief if you control at least 50% of a business or hold assets used in a business you don’t own

Conditions:

You must have owned the assets for at least 2 years
The business must be actively trading, not an investment company

Important note:

From April 2026, a £1 million lifetime cap will apply to BPR (combined with APR), and relief on AIM shares will reduce to 50%.

4. Agricultural Property Relief (APR) - Up to 100%

APR reduces or eliminates IHT on farmland, farm buildings, and certain dwellings.

What qualifies:

Agricultural land and buildings
Farmhouses (if of appropriate character and occupation)
Growing crops and woodlands under management

Relief available:

100% relief if the property is owner-occupied or let under a qualifying tenancy
50% relief for some older tenancies or if criteria are partially met

Conditions:

Must have been owned and used for agricultural purposes for 2 years (owner-occupied) or 7 years (let)

Warning:

As with BPR, a £1 million cap on APR will apply from April 2026.

5. Spouse or Civil Partner Exemption – 100%

Transfers between spouses or civil partners are completely free from inheritance tax, regardless of value.

The surviving spouse inherits without IHT
Any unused NRB and RNRB can also be transferred

This relief underpins many estate planning strategies for married couples.

6. Charitable Gifts – Exempt from IHT

Gifts to UK registered charities are exempt from inheritance tax.

Additional incentive:

If you leave 10% or more of your net estate to charity, the IHT rate on the rest of your estate drops from 40% to 36%.

This can both reduce tax and help support causes you care about.

7. Gifts During Lifetime – Potentially Exempt Transfers

Gifting is a powerful IHT reduction tool if done properly.

7-Year Rule:

Gifts made more than 7 years before death are exempt
Gifts within 7 years may be taxed, but taper relief reduces the rate after 3 years

Annual Gift Exemptions:

£3,000 per year (can carry forward one year if unused)
£250 small gift exemption per person
Wedding gifts of up to £5,000 for a child, £2,500 for a grandchild

Gifts from Surplus Income:

Regular gifts from surplus income (not capital) are exempt if they:

Don’t affect your standard of living
Are part of a consistent pattern

These gifts must be well documented, but they can allow you to pass on large sums without triggering IHT.

8. Life Insurance in Trust – Outside Your Estate

A whole-of-life insurance policy written in trust is not part of your estate and the payout is IHT-free.

This is a popular strategy to:

Cover your estate’s expected IHT bill
Provide liquidity for beneficiaries
Prevent forced sale of property or business assets

9. Trust Planning – Strategic Relief (If Structured Correctly)

While trust rules have tightened, well-planned trusts can still:

Move assets outside your estate
Control how and when wealth is passed on
Protect beneficiaries with special needs or vulnerabilities

Discretionary trusts may face periodic charges, but still offer long-term benefits when properly administered.

IHT Planning Before the 2026 Reforms

With significant changes coming into force in April 2026, including caps on reliefs and wider taxation of pensions, now is the time to use the current reliefs to their full potential.

You should act now to:

Lock in 100% BPR and APR
Transfer qualifying assets before the new caps
Review your business structure or land holdings
Restructure ownership to preserve full exemptions

How Belgravia Capital Wealth Management Can Help with IHT Planning

We specialise in estate and inheritance tax planning for high-net-worth individuals, landowners, and family business owners. Our services include:

Full IHT exposure analysis and forecasting
Guidance on BPR, APR, and relief eligibility
Gifting and trust strategies
Life insurance planning for IHT coverage
Annual estate reviews aligned with upcoming rule changes

We work closely with your legal and accounting team to deliver a seamless estate plan that protects your wealth and legacy.

Conclusion: What Inheritance Tax Reliefs Are Currently Available?

Plenty, but many of them are under threat.

From Business and Agricultural Relief to the Residence Nil-Rate Band, the current rules still offer significant opportunities to reduce inheritance tax.

But with reforms already in motion, it’s vital to act before the rules tighten.

Smart estate planning today means smaller tax bills and a greater legacy for your family tomorrow.