Inheritance Tax: no ease up on changes

Inheritance Tax (IHT) net set to widen.

Changes announced last year are set to bring a radical overhaul of two key IHT reliefs, business property relief (BPR) and agricultural property relief (APR), from 6 April 2026.

The real game changer is the significant restriction in the amount of relief at 100% available on the value of qualifying agricultural property and relevant business property in an estate or settlement (trust). At present, availability of 100% relief on qualifying property is unlimited, but the new rules cap this, with the introduction of a £1 million allowance. The outworking will be that many more people will now need to fund an IHT liability in the future.

In outline

• the new £1 million allowance will apply to the combined value of business and agricultural assets in an estate qualifying for 100% BPR and/or 100% APR
• the £1 million allowance will also apply to the combined value of relievable agricultural and business property in trusts
• any qualifying relievable property above this £1 million limit will attract relief at a lower rate of 50%
• the £1 million allowance will increase in line with inflation from 6 April 2030.

What might this mean for you? 

The first thing to take on board is that the £1 million limit is a per person limit. It won’t be possible to transfer unused allowance between spouses or civil partners. Anything unused will be lost.

Advance planning will become key, to ensure maximum use is made of each individual limit. The changes will need consideration alongside other IHT rules, like those on lifetime gifting; and an assessment of how IHT interacts with other taxes. There will also be the need to consider how any future tax liability arising on death will be paid. For some business owners, this may mean fast forwarding plans to pass assets to the next generation – or restructuring how the business is owned and run.

We appreciate that these decisions may involve a major reorientation in outlook, and could require especially sensitive handling. Nevertheless, though there could be last-minute adjustments to the new rules, the expectation must now be that these changes are definitely on the way, and plans made accordingly.

In addition, further changes to IHT expected from 6 April 2027, will bring unused pension funds and death benefits within scope of IHT. These changes may also require planning, especially for those with significant pension savings. Again, we can advise on the options that may be available.

Bespoke advice is always recommended, so please do contact us to discuss what these changes may mean for you.