Changes to Inheritance Tax reliefs were introduced on 6th April 2026, and the scope of 100% Agricultural Property Relief (APR) and Business Property Relief (BPR) – which was previously unlimited to qualifying assets - is now capped at a combined allowance of £2.5m per individual.
Qualifying business and agricultural assets above the £2.5m allowance will receive 50% relief, therefore giving an effective Inheritance Tax (IHT) rate of 20%.
Any unused allowance can be transferred to a surviving spouse/civil partner, allowing up to £5m IHT relief, and the Government has confirmed that if your spouse died before 6th April 2026, you will receive the full relief, even if they passed assets to someone other than their spouse.
This means, if you haven’t already, you will need to consider your business succession plan - how these changes impact your estate, and how your assets will be passed on to the next generation, as the changes could result in an IHT liability on death.
Here are the answers to some key questions business owners need to know.
1. Is it too late to act now that the IHT rules have changed?
No, it’s not too late to plan. While some planning needed to be completed pre-April, planning can continue, and should be done at the earliest opportunity to mitigate the impact of the changes, particularly if you have a larger estate with qualifying assets valued at more than £2.5m, as complex planning can take time.
2. What should I prioritise in planning?
Your objectives first: Consider who should own and run the business, when you will retire, and how much income you will need when you do. Make sure your tax strategy follows the plan, not vice versa.
Family input and wishes: Speak to your family about your plans and how they could impact them.
Value qualifying assets: Confirm valuations and identify any 20% exposure above it.
Review wills and agreements: Ensure your will, shareholder/partnership agreements, and any trusts, reflect the new regime and your desired allocation of the 100% allowance.
Check your exposure to the Alternative Investment Market (AIM): Consider alternatives if the new 50% relief (previously 100% IHT relief) for AIM-listed shares undermines your original strategy.
Model cashflows to fund any liability (dividends, insurance, staged disposals) and keep documentation ready.
3. Will my spouse/civil partner automatically get my unused allowance?
Yes, any unused allowance is transferable on death, including where the first death was before 6 April 2026. It’s not necessary for both spouses to jointly own the qualifying assets for transfer to work; the allowance can pass even if only one spouse owned the assets. This gives couples up to £5m of 100% relief on APR/BPR assets on the second death.
4. Can I still make lifetime gifts, and how will this help my position?
Lifetime gifts remain a useful tool, but the new rules mean timing and structure matter more than ever. Transferring qualifying business assets during your lifetime can move future growth outside your estate and use some or all of your £2.5m 100% APR/BPR allowance. For individuals, the allowance refreshes after seven years, so well-timed gifts can create room for later planning.
You will need to ensure you consider the loss of income and control over these assets, as well as potential capital gains implications.
5. Is it still beneficial to use trusts?
Trusts still have an important role, and are particularly useful when you haven’t decided on your succession plans or where you need to remove assets from your estate but haven’t decided who should own them. Trusts can hold such assets away from everyone’s estate until such decisions are made, but need careful consideration, and you should seek advice in the area, as there are tax charges that can apply every time assets leave a trust and every ten years, although these charges are quite small in comparison to the main IHT rate.
6. Do I need to review my pension structure?
It is common to hold business premises in a SIPP or SSAS pension structure; currently, this is not an issue as the pension is exempt from IHT, but after 6 April 2027, this could have significant implications because pension assets are not classed as relevant business property or agricultural property, so do not qualify for BPR or APR.
7. Should I consider life insurance to help cover my Inheritance Tax bill?
Life insurance is an effective way of protecting the next generation, and can make a significant difference, providing a fund for inheritance tax should anything unexpected or tragic happen, rather than your beneficiaries having to sell off your assets.
It may also be appropriate to pay potential IHT, if you die in the first seven years after making a gift.
Take action to protect your assets and your family’s position
These are huge, once-in-a-generation changes. It is important to build a plan that balances family circumstances and goals, business continuity and tax efficiency. A structured review now - values, reliefs, wills, trusts, and funding - will give you clarity and options.
If you would like to discuss your next steps, please speak to our specialists. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
