Inheritance Tax (IHT) rules have changed significantly from April 2026, with further changes planned for pensions from April 2027.
The main reforms affect Agricultural Property Relief (APR), Business Property Relief (BPR), AIM shares and, from 2027, unused pension funds. The standard Inheritance Tax thresholds have also been frozen for longer.
These changes could affect farmers, business owners, investors, pension holders and families with valuable estates. Reviewing your Will, assets, pensions and existing estate planning can help you understand whether your family could face a higher tax bill.
The biggest changes from 6 April 2026 relate to Agricultural Property Relief and Business Property Relief.
A further major change will affect unused pension funds from 6 April 2027.
Here is a quick overview:
|
Change |
Effective date |
|
APR and BPR 100% relief limited to £2.5 million |
6 April 2026 |
|
50% relief on qualifying APR/BPR assets above £2.5 million |
6 April 2026 |
|
AIM and certain unlisted shares receive 50% relief |
6 April 2026 |
|
Nil-Rate Band remains at £325,000 |
Until 6 April 2031 |
|
Residence Nil-Rate Band remains at £175,000 |
Until 6 April 2031 |
|
Most unused pension funds brought into IHT |
6 April 2027 |
Agricultural Property Relief and Business Property Relief can reduce the amount of Inheritance Tax payable on qualifying assets.
Before the reform, qualifying agricultural and business assets could often receive 100% relief, subject to the relevant conditions.
From 6 April 2026, the rules have changed.
The first £2.5 million of qualifying agricultural and business property can receive 100% relief. Qualifying assets above this allowance generally receive 50% relief.
This means the excess can be subject to an effective IHT rate of up to 20%, rather than the standard 40% rate.
The £2.5 million allowance applies to the combined value of qualifying agricultural and business property.
For example, if someone has:
The combined value is £3 million.
The first £2.5 million can qualify for 100% relief. The remaining £500,000 generally receives 50% relief.
The Government increased the allowance from the originally proposed £1 million to £2.5 million in December 2025. This reduced the estimated number of affected estates.
Yes. The unused allowance can be transferred between spouses and civil partners.
This means a couple could potentially have up to £5 million of qualifying agricultural and business property covered by the 100% relief allowance.
This is in addition to other available IHT allowances, such as the Nil-Rate Band and, where applicable, the Residence Nil-Rate Band.
The way assets are owned and passed between spouses can therefore become an important part of estate planning.
The main IHT thresholds have not increased.
The Nil-Rate Band remains £325,000, while the Residence Nil-Rate Band remains £175,000, subject to the existing rules.
The Residence Nil-Rate Band starts to taper for estates above £2 million.
These allowances have been frozen for several years and are now expected to remain frozen until 6 April 2031.
As property prices and other assets increase, more estates could therefore become subject to IHT even if the family's wealth has not increased significantly in real terms.
The changes are particularly relevant if you:
The Government estimates that up to 1,100 estates could pay more IHT in 2026-27 because of the APR and BPR reforms.
This does not mean every business owner or farmer will face a higher tax bill. The impact depends on the value and type of assets, ownership arrangements and the other allowances available.
The 2026 Inheritance Tax reforms may affect how much tax your family pays on your estate. Reviewing your financial and family arrangements now can help you understand your potential IHT liability and identify areas that may need attention.
Consider the following steps:
Your Will should reflect your current family circumstances, assets and wishes.
A change in the value of your estate or the IHT rules could mean that an old Will no longer works as intended.
Make sure you have up-to-date valuations for:
This gives you a clearer picture of the potential value of your estate.
If you own a farm or business worth more than £2.5 million, check how the new APR and BPR rules could affect the amount of relief available.
The way assets are owned may also affect how much relief can be used between spouses or civil partners.
With most unused pension funds due to come within IHT from April 2027, pension planning should form part of your wider estate planning.
Review your pension providers, beneficiaries and expression of wish forms. Do not make major pension withdrawals or transfers simply because of the tax changes without taking appropriate advice.
Lifetime gifts can affect IHT calculations. Gifts to individuals can generally become exempt from IHT if the person making the gift survives seven years, although different rules and exemptions can apply.
Keep clear records of significant gifts and check how they could affect your estate.
If you have placed business, agricultural or other assets into a trust, the new rules may affect the IHT treatment of those assets.
Trust planning can be complicated, so it is important to review existing arrangements rather than assuming they will continue to work in the same way.
Inheritance Tax planning can involve your property, investments, business assets, pensions, gifts and family arrangements. At PHS Associates, we can help you review your tax position and understand how the 2026 IHT reforms could affect your estate.
We can help you assess your available allowances, review the tax position of your assets and consider the potential impact of the new APR and BPR rules. We can also work alongside your solicitor or financial adviser where legal or investment advice is required.
For help with your tax requirements, contact us on 0208 861 1685 or info@phs-uk.co.uk.
The 2026 Inheritance Tax reforms have changed how some farms, businesses and investments are treated for IHT. The £2.5 million allowance for 100% APR and BPR relief, the reduction in relief for certain AIM shares and the upcoming pension changes from April 2027 all make estate planning more important. At the same time, the £325,000 Nil-Rate Band and £175,000 Residence Nil-Rate Band remain frozen until 2031. If you have a valuable estate, business, farm, investments or pension, now is a good time to review your position and understand how the new rules could affect your family.
Note: This article is for general informational purposes only and should not be treated as personal tax, legal or financial advice.
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