Reviewing your Inheritance Tax strategy ahead of imminent reforms
Significant changes to the UK Inheritance Tax (IHT) regime are coming into effect from April 2026, and individuals with business or agricultural assets must act now to safeguard reliefs and avoid unintended tax consequences. The reforms will restrict long standing reliefs, impact succession planning, and place renewed focus on lifetime gifting opportunities.
This insight explains what is changing, how it may affect business owners, farmers, and families, and the practical steps to consider now.
1. Major changes to Business Property Relief (BPR) and Agricultural Property Relief (APR)
From April 2026, both Business Property Relief (BPR) and Agricultural Property Relief (APR) will become subject to a new cap:
- The first £2.5 million per person of qualifying assets will continue to benefit from 100% relief.
- Any value above £2.5 million will only qualify for 50% relief.
Importantly:
- AIM listed shares will no longer receive 100% relief at all – they will be restricted to 50% relief under the new rules listed shares will no longer receive 100% relief ‑listed shares will no longer receive 100% relief
- These caps could significantly increase IHT exposure for individuals with valuable trading businesses, farmland, or diversified portfolios including AIM investments.
For many families, the current unlimited 100% relief has formed the backbone of long‑standing succession strategies. The upcoming changes mean existing plans must be revisited.
2. Consider lifetime gifting before the rules change
With relief becoming restricted from April 2026, there is a limited window to:
- Gift business or farming assets into trust under the more generous current regime.
- Transfer assets to the next generation while maximising 100% relief where available.
- Lock in existing reliefs before the new caps take effect.
Gifting now may also reduce the size of your estate for future IHT purposes, provided that you survive seven years from the date of gift. However, planning must carefully consider control, family dynamics, and commercial implications.
3. Review Wills and succession plans
The upcoming restrictions mean that existing Wills may no longer achieve their intended tax outcome. Key actions include:
- Ensuring business or farming assets still pass to the intended beneficiaries tax efficiently.
- Reassessing whether assets should be left directly to family members or via trust.
- Reviewing shareholder agreements, partnership agreements, or cross-option arrangements.
A full estate planning review is strongly recommended for business owners and agricultural families.
4. Make use of annual and small gift exemptions
Alongside larger strategic planning, individuals should not overlook the ongoing exemptions available for lifetime gifting:
- £3,000 annual exemption – with carry forward of unused allowance from the previous tax year.
- Small gifts exemption – up to £250 per person, per tax year.
- Wedding gift allowances – up to £5,000 from a parent, £2,500 from another relative, or £1,000 from anyone else.
Regular gifting can gradually reduce the value of an estate without triggering immediate IHT charges.
5. Consider regular gifts out of surplus income
One of the most valuable – yet often under‑used – exemptions allows individuals to make regular gifts out of surplus income. These:
- Do not fall into the "seven-year rule"
- Must be part of a pattern of gifting, not one-off transfers
- Must not reduce the donor’s standard of living
For high-income individuals, this can be a powerful tool for long term estate reduction
We’re here to help
The forthcoming IHT changes represent the most significant shift in business and agricultural succession planning in decades. Acting early will allow families to maximise reliefs while they remain available, restructure ownership, and ensure their long-term estate planning remains fit for the future.
Our specialists can help model the impact of the April 2026 rules, explore gifting strategies, review Will provisions and update succession plans accordingly.
If you would like support in reviewing your IHT strategy, we are here to help. Get in touch today.
