If you’re thinking about passing on your business, farm, or other valuable assets, there are some important tax changes coming that you should know about. The way Inheritance Tax relief works for business and agricultural assets is being updated and these changes could mean your family pays more tax later if you don’t plan ahead. Here’s a clear look at what’s happening, when it starts, and what you can do now to prepare.
What’s changing from April 2026
Right now, if you give away qualifying business or farming assets, you may be able to claim full IHT relief — known as Business Property Relief (BPR) or Agricultural Property Relief (APR). In simple terms, that means you could pass on those assets without having to pay any inheritance tax on them.
But from 6 April 2026, that will change. The government is introducing a £1 million limit on how much property can qualify for the full 100% relief. Anything above that amount will only get 50% relief.
So, if your qualifying assets are worth £2 million, the first £1 million could still be fully tax-free, but the other £1 million might only get half relief — leaving some tax to pay.
Why the change is happening
The government says this change is designed to make the system “fairer” by reducing the amount of tax relief given on very large estates. However, this could also mean more people, especially those who own family farms or businesses, will end up paying inheritance tax in the future.
That’s why it’s worth planning now, while there’s still time to take advantage of the current rules.
The transitional rules – What they mean
Because the new limits won’t take effect until 2026, there are special transitional rules to cover gifts made before then. These rules decide which system will apply — the current one or the new one.
Here’s how it works under the new timetable:
1. If death happens before 6 April 2026
The existing relief rules will continue to apply. There’s no cap, so full relief covers all qualifying assets.
2. If a gift is made before 30 October 2024
You’ll benefit under the current system. These gifts will still enjoy full relief, even after the changes take effect.
3. If a gift is made between 30 October 2024 and 5 April 2026
This period is more complex. Gifts made then could fall under the new £1 million limit if death occurs within seven years.
4. If a gift is made after 6 April 2026
The new £1 million limit takes effect. Anything above this amount will only get 50% relief.
Also, unused allowances won’t pass between partners, and the rules for trusts will operate separately.
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How trusts will be affected
If you have a trust or plan to set up a trust, the new rules will matter there too. Each trust will get its own £1 million allowance, which refreshes every ten years.
- Trusts created before 30 October 2024 will generally keep their own £1 million cap.
- Trusts set up after that date will be included in the new system once assets are transferred into them.
If you already have a trust, check it before the new rules take effect to make sure it still suits your future plans.
Why timing is so important
When it comes to gifts, the date you made them can make a big difference to the tax outcome. Here’s why:
If you were fortunate to gift before 30 October 2024, you might save tax: gifts made before that date fall under the old rules and can still receive full relief.
If you waited until after that date it could cost more: gifts made between 30 October 2024 and April 2026 may get less relief and lead to a higher tax bill. Gifts after 6 April 2026 fall within the new limit.
The seven-year rule still applies: if you die within seven years of making a gift, it may still be counted in your estate for tax purposes.
Even a few months’ difference in timing can affect how much tax is due, so reviewing past gifts and planning future ones carefully is important.
A quick example
Let’s say you own a small family business worth about £2 million. You decided to pass the shares to your children.
If you had given those shares before October 2024, you could still get full 100% relief, no inheritance tax to pay, provided you meet the normal rules.
If you had waited and made the gift in 2025, but pass away within seven years, only £1 million might qualify for full relief. The other £1 million would get 50% relief, meaning part of your gift could be taxed.
That difference in timing could mean thousands of pounds in extra tax or none at all. Hindsight is a wonderful thing!
What you can do now
Here are a few points to go through before the new rules come in:
- Review your estate plan: List out your assets and find out which ones qualify for APR or BPR. Then see how the new limits might affect your plans.
- Think about early gifts: If you’re already planning to hand over property or shares, doing it asap could help you keep more relief and pay less tax later.
- Look at ownership structures: If you’re a couple, review who owns what to make full use of both of your allowances.
- Check your trusts: Take another look at any trusts you’ve set up or plan to create. Make sure they still fit your goals under the new inheritance tax system.
- Get professional advice: Since these changes can be complex, it’s best to get advice from an accountant who can guide you through what applies to you.
How can we help
We can make the new rules easier to understand and help you prepare for them. Our accountants can:
- Review your assets and confirm which ones qualify for tax relief.
- Go over the timing of any gifts to show how it may affect your tax bill.
- Work alongside your solicitor to keep your paperwork clear and accurate.
- Keep you updated as the rules are finalised — since the legislation may still change before 2026.
Speak to one of our accountants today. We’ll help you plan ahead, understand your options, and make sure your estate is protected under the new rules.
