Inheritance Tax (IHT) net set to widen.
From 6 April 2026, changes announced last year will radically overhaul two key IHT reliefs: business property relief (BPR) and agricultural property relief (APR).
The real game changer is the significant restriction of 100% relief on qualifying agricultural and relevant business property in estates or settlements (trusts). Currently, relief is unlimited, but the new rules will introduce a £1 million allowance that effectively caps the relief available. 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 £1 million will attract relief at a lower rate of 50%, and the £1 million allowance will rise with inflation from 6 April 2030.
What might this mean for you?
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. You should also consider how to pay any future tax liability on death. Some business owners may accelerate passing assets to the next generation or restructure business ownership and operations.
We appreciate that these decisions may involve a major reorientation in outlook, and could require especially sensitive handling. While last-minute adjustments are possible, these new rules are now expected, so plans should be made accordingly.
From 6 April 2027, further IHT changes will bring unused pension funds and death benefits into its scope. 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.