Significant updates to the UK Inheritance Tax regime take effect from 6th of April 2026, meaning that an increased number of estates will be susceptible to IHT making it more important than ever for individuals to look at ways to reduce IHT exposure.
Key Changes
The government has introduced significant reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) which will affect how much inheritance tax many business owners, farmers and trustees will pay.
From 6 April 2026, the full 100% relief for BPR and APR will only apply to the first £2.5 million of combined agricultural and business property, with any value above this receiving relief at just 50%.
Any unused part of the £2.5 million allowance will be transferable between spouses and civil partners on death, meaning that couples can potentially benefit from a combined allowance of up to £5 million on qualifying assets.
Trusts created before the 30th of October 2024 will each have their own 100 percent relief allowance, but where a settlor has created multiple trusts after this date, the £2.5 million allowance will be shared across the trusts.
These new rules also apply to any lifetime gifts made from the 30th of October 2024, if the donor dies on or after the 6th of April 2026 but within seven years of the gift.
BPR availability on different types of shares
Business property relief is available on sole trader or partnership interests in a trading business and shares in unquoted companies, that have been owned for at least two years prior to death or transfer, at 100% up until the £2.5 million allowance.
However, shares in AIM-Listed and Enterprise Investment Scheme (EIS) companies, and land, buildings and machinery used wholly or mainly for the business will now only qualify for 50% relief.
Agricultural Property Relief
Agricultural property relief is available on agricultural land, farm buildings and certain farmhouses, that has been owned and used for farming for at least two years prior to death or transfer.
For many farmers, it is important to consider whether both reliefs may be available on the same property.
What is Staying the Same?
The Government have confirmed the Nil‑Rate Band (NRB) allowance of £325,000 and the Residence Nil‑Rate Band allowance of £175,000 will remain frozen until 6 April 2031.
The NRB allowance has remained the same since 2009. However with increasing inflation rates and rising property values, it is estimated that the real value of the IHT personal allowance will have halved by 2031.
Things to consider
These changes will require a proactive approach to estate planning.
It is important to understand your potential IHT liability arising from these changes, and to ensure Wills, Trusts and succession plans are reviewed or created to manage exposure, and to ensure they make best use of available allowances, factoring in these new rules.
At Vault Private Client (based on West Street, Alderley Edge Village), our experts have a variety of different tools that can help build a long term IHT mitigation strategy. We would be delighted to meet with you at our local offices to discuss these further.
