Today, 6 April 2026, marks the start of the 2026/27 tax year and with it some of the most significant changes to Inheritance Tax (IHT) relief in recent memory also comes into practice. If you own a trading business, farm agricultural land, or have a substantial estate that includes either, these changes should be of specific concern to you!
This article is written to give you a clear picture of exactly what has changed, whether you are affected, and what steps you can take to protect your estate and your family’s future.
What Has Changed Today in IHT Relief?
Until yesterday, Business Property Relief (BPR) and Agricultural Property Relief (APR) were among the most powerful tools available in inheritance tax planning and estate planning. For many qualifying assets such as trading businesses and agricultural property, 100% relief was available with no upper ceiling. Which means a sufficiently structured estate could pass free of IHT entirely. It is worth noting that even before today, not every qualifying asset attracted 100% relief: some business assets under existing rules only qualified for 50% BPR. But for those assets that did attract full relief, there was no cap on the value to which that relief could apply.
That has now changed. As of today, several significant restrictions come into force.
The New Inheritance Tax Relief Changes at a Glance
100% Business Relief (BPR) and Agricultural Property Relief (APR) now apply only to the first £2.5 million of qualifying assets in an individual’s estate.
Assets above the £2.5 million threshold attract 50% relief only producing an effective IHT rate of up to 20% on the excess (since 40% IHT applies to the remaining 50% that is not relieved).
Importantly, any unused portion of an individual’s £2.5 million allowance can be transferred to a surviving spouse or civil partner. This means a married couple or civil partners may, between them, be able to shelter up to £5 million of qualifying APR/BPR assets at 100% relief, though the precise position depends on individual circumstances and professional advice should always be taken.
Shares admitted to trading on recognised stock exchanges but designated as ‘not listed’ (such as shares traded on AIM) now attract only 50% BPR in all cases, regardless of the £2.5 million threshold.
The nil-rate band remains frozen at £325,000 up to and including the 2030-31 tax year, regardless of rising asset values.
To illustrate the impact:
Take a sole estate with qualifying business or farm assets worth £5 million. Under the new rules, the first £2.5 million benefits from 100% relief. The second £2.5 million receives 50% relief, leaving £1.25 million exposed to IHT at 40%: a gross illustrative liability of £500,000, before taking into account any other available allowances or exemptions such as the nil-rate band, residence nil-rate band, or spouse exemption, which may reduce the actual charge.
This is intended as a simplified illustration of how the new cap operates, not a comprehensive tax calculation.
Are You Affected By IHT Relief Changes?
You are likely to be affected by these Inheritance Tax relief changes if one or more of the following applies:
Business Owners
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You own shares in, or the whole of, a qualifying trading company
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The total value of your business interest exceeds £2.5 million
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Your estate (including business assets) would exceed the IHT nil-rate band of £325,000
Farmers and Agricultural Landowners
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You own or rent out agricultural land or property used for farming
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The combined value of agricultural assets in your estate exceeds £2.5 million
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Your farm has appreciated significantly in value over recent years
An important note on asset values
The nil-rate band has been frozen at £325,000 since 2009 and will remain fixed up to and including the 2030-31 tax year. Meanwhile, land, property and relevant business values have risen substantially. Many estates that were once comfortably outside IHT exposure are now well within its reach and the new relief caps mean that previously protected assets may now carry a tax charge for the first time.
What Can You Do Now After these Inheritance Tax Relief Changes ?
While the rules have changed, estate planning remains a well-established discipline with a range of legitimate, HMRC-compliant strategies available. The key is acting sooner rather than later, as many of the most effective approaches require time to implement properly.
1. Review Your Current Exposure
The starting point is to understand exactly where your estate stands today. A comprehensive IHT review will identify the current value of your qualifying assets, how much relief you can still claim under the new rules, and the size of any potential liability. This is the foundation of sound planning.
2. Consider Lifetime Gifting
Transferring assets during your lifetime remains one of the most effective ways to reduce IHT exposure. Outright gifts to individuals known as potentially exempt transfers (PETs) become fully exempt from IHT if you survive for seven years after making them. Careful, structured gifting of business or agricultural assets can gradually reduce the taxable value of your estate while retaining appropriate control and financial security.
It is important to note, however, that this seven-year rule applies specifically to outright gifts to individuals; different rules apply to certain transfers into trust or where a gift with reservation of benefit arises, and these carry their own IHT consequences. Professional advice is essential before making significant lifetime gifts.
3. Explore Trust Structures
Trusts remain a widely used and valuable tool in estate planning, particularly for business and agricultural assets but this is an area that has grown significantly more complex under the new rules and merits careful attention.
As part of the wider reform package, a £2.5 million allowance framework applies to qualifying BPR and APR assets held within trusts, and transitional rules have been introduced for trusts established before 30 October 2024. The interaction between an individual’s personal £2.5 million allowance and assets held through trust structures is not straightforward. In some circumstances they are aggregated, and the sequencing and history of trust arrangements can significantly affect the relief available.
Given this complexity, existing trust arrangements involving business or agricultural property should be reviewed urgently in light of the new rules. And for those considering new trust structures as part of their planning, it is essential that these are designed with the reformed framework in mind from the outset. We would not recommend proceeding without bespoke specialist advice.
4. Review Business Ownership and Structures
For business owners, the structure and ownership of your company may now warrant review. In some cases, restructuring shareholdings, considering family investment companies, or reviewing partnership arrangements can create planning opportunities that reduce overall IHT exposure whilst meeting your wider objectives.
5. Revisit Wills and Lasting Powers of Attorney
It is easy to overlook the basics when planning more complex strategies but the fundamentals matter. An up-to-date will that reflects your wishes and incorporates sensible IHT planning, together with a Lasting Power of Attorney, should sit at the heart of any estate plan. If these have not been reviewed in light of the new rules, now is the right time.
6. Consider Life Assurance to Cover the Liability
Where some IHT exposure is unavoidable or accepted, a whole-of-life insurance policy written in trust can be structured to pay out on death and cover the IHT bill ensuring your family receives the full benefit of your estate without having to sell assets to meet the tax charge. For farming families in particular, this can be a pragmatic and proportionate solution.
7. Reviewing How Assets Are Characterised and Used
The nature of how an asset is used can be as important as its value. Assets held as passive investments ( whether land let under a tenancy or cash and property sitting inside a company do not attract BPR or APR and can dilute the relief available on genuinely qualifying assets.
Where there is scope to introduce or formalise genuine agricultural or trading activity, this may improve the characterisation of an asset for relief purposes.
As a simple example, agricultural land currently managed as an investment might support a grazing arrangement or in-hand farming element that strengthens its APR position. Similarly, within a trading company, reviewing the balance of trading versus investment assets and whether certain holdings should sit elsewhere, can help ensure the £2.5 million allowance is applied as effectively as possible.
HMRC applies close scrutiny to the distinction between trading and investment activity, and any restructuring must reflect genuine commercial substance rather than form alone. Professional advice is essential before making any changes of this kind.
Speak to Our Estate Planning Team Today
If you are a business owner, farmer, or landowner with qualifying assets and you are unsure how today’s changes affect your estate, we are here to help. Our estate planning and IHT specialists offer a confidential, no-obligation initial review to help you understand your current position and the options available to you.
A Note on Timing
These changes may come as a concern, particularly for those who have built their businesses or farmed their land over many decades with the previous rules firmly in mind. That is entirely understandable.
What we would encourage is this: resist the temptation to delay. IHT and Estate planning strategies particularly those involving gifts or trusts, take time to become fully effective. The earlier a review begins, the greater the range of options available to you. A conversation now is far more valuable than one in five years’ time.
This article is for general information purposes only and does not constitute financial, legal or tax advice. You should seek professional advice tailored to your individual circumstances before taking any action.
