SolvedIHTM25522 | AR/BR 100% relief allowance: individuals - interests in possession within IHTA84/S49
From HM Revenue & Customs · Inheritance Tax Manual
If an individual has an interest in possession in settled property which falls within S49/IHTA84, the individual is deemed to be beneficially entitled to the property. Charges arise on the ending of such interests whether on the death of or during the lifetime of the individual.
While S49 continues to apply there is no separate trust rule. The 100% relief allowance on any chargeable transfer on or after 6 April 2026 is governed by S124D/IHTA84 as it is for gifts and deaths of personally held property.
In other words, the 100% relief allowance of up to £2.5m covers both personally held property and settled property within S49/IHTA84.
Example 1
Diana’s father died in 2017, and she was given an interest in possession in his residuary estate. Diana died in 2029.
The settled property has always included agricultural and business property qualifying for 100% relief. That property is valued at £2m on her death.
She did not own any relievable property personally.
In the seven years before her death, the trustees had used their powers to make distributions of trust capital to other chargeable beneficiaries
(i) in 2023 there was a distribution of £5m, covered by 100% relief
(ii) in 2025 there was another distribution of £1m, also covered by 100% relief
and, in each case, the beneficiaries retained the relievable property.
As Diana died within 7 years of transfers (i) and (ii) above become chargeable transfers
(i) this transfer was prior to 30 October 2024 and is not affected by the 100% relief allowance. It still gets full relief.
(ii) this transfer was made in the transitional period and is fully relievable but as Diana died within 7 years it uses £1m of her £2.5m allowance.
The remainder of the allowance, £1.5m, is available for any relievable property in the estate.
In this case, it is applied to the settled property on her death which is included at a value of 50% * (£2m - £1.5m) = £250k after relief.
Note that if, in the example above, Diane had also owned some qualifying property personally then the remaining allowance (£1.5M) would have to be apportioned between the free estate and the settled property (IHTM25524)
When the property remains settled property but S49 no longer applies
In such cases the trustees will have to consider whether they have or have acquired an 100% trust relief allowance as set out in S124G-124K/IHTA84 and the amount of allowance will depend on whether the trust is or contains
Example 2
After the death of Diana the trust continues on discretionary terms for the benefit of the wider family. The settled property is now relevant property and because there was 100% relievable property in the trust on 30 October 2024, it is also a pre-commencement settlement. So, once the trustees have satisfied the ownership and occupation tests they will have unlimited 100% relief until the next 10-year anniversary in 2037 at which time they will have an 100% trust allowance of £2.5m, subject to any indexation increase.