A seismic shift in estate planning
From 6 April 2026, the full 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property, with anything above this receiving only 50% relief. This represents one of the most significant changes to inheritance tax in decades and requires immediate action from business owners and landowners.
Understanding the impact
For example, an interest of £2 million in shares in an unquoted company would attract 100% relief on the first £1 million and 50% relief on the second £1 million, meaning a potential inheritance tax liability of £200,000, and an effective inheritance tax rate of 10%. This compares to zero IHT liability under current rules – a dramatic change requiring urgent strategic response.
The reforms are expected to result in around 2,000 estates across the UK paying more Inheritance Tax in 2026 to 2027, representing 0.3% of all UK estates and 4.5% of taxpaying estates. If you own substantial business or agricultural assets, there’s a reasonable probability you’ll be affected.
Who this affects most significantly
Business owners with companies valued over £1 million, particularly those holding unquoted company shares, are directly impacted. Around 1,000 estates are expected to hold shares designated as “not listed” on the markets of recognised stock exchanges, facing the full brunt of these changes.
Agricultural landowners and farmers face particular concern. Up to 520 estates claiming agricultural property relief are expected to pay more Inheritance Tax in 2026 to 2027, though almost three-quarters of all estates claiming agricultural property relief will not be affected by the changes.
Property investors and those holding AIM shares also face new restrictions. IHT relief on AIM shares will also be restricted to 50% from April 2026, removing a popular estate planning tool.
The time-limited window for action
The new rules will apply for lifetime transfers on or after 30 October 2024 if the donor dies on or after 6 April 2026 – this prevents forestalling. However, significant planning opportunities still exist for those who act immediately.
Strategic options before April 2026
Spousal transfers remain fully exempt. Full exemptions for transfers between spouses and civil partners continue to apply, meaning any agricultural and business assets left to a spouse or civil partner will be tax free. For married couples, this means two people with farmland can pass on up to £3 million to a child or grandchild tax free when combining allowances.
The seven-year gifting strategy. The £1 million relief allowance will refresh every seven years for lifetime gifting (and every ten years for trusts). Making gifts now starts the seven-year clock, potentially allowing assets to pass free of IHT if the donor survives seven years.
Trust restructuring opportunities. For trusts settled before 30 October 2024, there’s a time-limited opportunity to distribute APR and BPR assets to beneficiaries with no exit charge before the new regime starts to apply. However, this window depends on each trust’s 10-year anniversary date.
Business restructuring considerations. Certain corporate structures may be more or less favourable under the new rules. Professional advice is essential to evaluate whether restructuring could provide advantages.
Payment flexibility helps but doesn’t eliminate the problem
Tax can be paid in instalments over 10 years interest free, rather than immediately, as with other types of inheritance tax. This interest-free instalment option will be extended to all property eligible for agricultural property relief or business property relief. While this eases cash flow pressure, it doesn’t reduce the total tax liability.
Valuation becomes critical
Professional bodies such as the Chartered Institute of Taxation have expressed concern at how administratively burdensome it would become to value assets and calculate potential liabilities. Accurate professional valuations will be essential for estates near the £1 million threshold.
Act now – the window is closing
With April 2026 just months away, any strategy requiring legal documentation, corporate restructuring, or complex planning must begin immediately. Even straightforward gifting strategies need time to implement properly.
At FMY Chartered Accountants, we’re working intensively with affected clients to model the impact of these changes and implement appropriate strategies. Our integrated approach combines tax planning, business valuation, and succession planning expertise to develop solutions tailored to each client’s circumstances. The cost of inaction could be hundreds of thousands of pounds in unnecessary IHT. The cost of proper planning is a fraction of the potential savings. Contact us urgently to review your position.
Contact FMY Accountants today at info@fmyaccountants.co.uk for tailored advice and a personalised plan for your business.