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The Inheritance Tax landscape has changed more significantly in the past eighteen months than at any point in a generation.
The reforms that took effect on 6 April 2026 will have real consequences for family businesses, farming estates and anyone who has previously structured their affairs in reliance on Agricultural Property Relief (APR) or Business Property Relief (BPR).
If you have not yet reviewed your position, now is the time to do so.
How has Agricultural Property Relief and Business Property Relief changed?
Until 5 April 2026, both APR and BPR could be claimed at 100 per cent on qualifying assets without any cap, which meant that a farm or business of any value could, in principle, pass between generations entirely free of Inheritance Tax, where conditions were met.
However, from 6 April 2026, that has changed and the 100% rate of relief is now capped at £2.5 million per individual across qualifying agricultural and business property combined.
Any value above that threshold now attracts only 50 per cent relief, producing an effective Inheritance Tax charge of 20 per cent on any assets above the threshold.
Any unused allowance is now transferable between spouses and civil partners, which means that a couple can potentially pass on up to £5 million of qualifying assets free of Inheritance Tax.
When combined with the standard nil-rate band and residence nil-rate band, couples may be able to leave up to £6 million to beneficiaries, where the right criteria are met, without generating any tax liabilities.
Who is still affected by these changes?
HMRC estimates that around 1,100 estates per year will pay more Inheritance Tax as a result of these changes.
That is a relatively small number in absolute terms, but it includes those with high-value agricultural landholdings, unlisted company shares, and trading businesses of significant size.
For those estates, the impact can be substantial and that is without accounting for further changes to Inheritance Tax that are just on the horizon.
From 6 April 2027, a further change will bring unspent pension assets within the scope of inheritance tax, adding a new dimension to planning for those with significant defined contribution pensions.
What to do now
If your estate includes agricultural property, business interests or significant pension assets, an estate planning review with a solicitor is essential to ensure that your Will is in line with any plans to minimise your Inheritance Tax bill.
The key steps will vary depending on your circumstances, but typically include:
- Reviewing your Will to ensure it is aligned with the new rules. Some Wills include provisions that were optimal under the old APR/BPR regime but may now produce unexpected tax charges.
- Considering the timing and structure of lifetime gifts, bearing in mind the transitional rules and the seven-year clock.
- Assessing how any Inheritance Tax liability would be funded, given that many affected estates hold illiquid assets, such as land or an unquoted business.
- Reviewing trust arrangements, particularly where they were established before October 2024 and hold agricultural or business property, as the rules for trust charges have also changed.
Inheritance Tax planning is a specialist area and the right approach will depend on the specific make-up of your estate.
If you would like to discuss how these changes affect your position, please get in touch with our experienced team.
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