From April 2026, significant changes to Inheritance Tax (IHT) reliefs on business and agricultural assets will take effect. For individuals and families whose wealth includes trading businesses, farmland or other qualifying assets, these reforms could lead to larger inheritance tax liabilities unless careful planning is undertaken well in advance.
For many families, these assets represent years – or even generations – of hard work. Taking time now to review your plans can help ensure your wealth passes to the people you intend, while making the most of the reliefs that remain available.
What’s changing?
Currently, qualifying assets may benefit from up to 100% relief from Inheritance Tax through Business Relief (BR) and Agricultural Relief (AR). This has allowed many business owners and farming families to transfer valuable assets to the next generation without creating a substantial tax liability.
From April 2026, the rules are changing.
The government has confirmed that full relief will apply only to the first £1 million of qualifying business and agricultural assets. Any qualifying value above this threshold will receive 50% relief, meaning that portion of the estate will effectively be taxed at 20%, rather than being fully exempt.
While the reforms are intended to limit relief on larger estates, they also mean that many families who have never previously expected an inheritance tax liability may now need to reconsider their plans.
Who should review their estate planning?
These changes are particularly relevant if you:
- Own a family business.
- Own agricultural land or a working farm.
- Hold shares in an unlisted trading company.
- Expect your qualifying business or agricultural assets to exceed £1 million.
- Are planning to pass your business or farmland to children or grandchildren.
- Have not reviewed your estate planning within the last five years.
Even if you believe your estate will remain below the new threshold, it is worth reviewing your position. Business values and land prices can change significantly over time, potentially increasing the value of your estate beyond current expectations.
What could this mean in practice?
Consider a family farm valued at £2 million.
Under the current rules, the entire value may qualify for 100% Agricultural Relief, meaning no inheritance tax is payable on those qualifying assets.
From April 2026:
- The first £1 million would continue to receive full relief.
- The remaining £1 million would receive only 50% relief.
- This would leave £500,000 subject to Inheritance Tax at 40%, creating a potential tax liability of £200,000.
Now consider a manufacturing business valued at £3 million.
If the owner were to die after the new rules take effect, only the first £1 million may receive full Business Relief. The remaining £2 million would receive 50% relief, potentially creating a significantly larger inheritance tax bill than under the current rules.
Every estate is different, and the overall tax position will depend on other available allowances and exemptions. However, these examples illustrate why early planning is becoming increasingly important.
Understanding the wider inheritance tax picture
Business Relief and Agricultural Relief are only one part of inheritance tax planning.
Depending on your circumstances, your estate may also benefit from:
- The Nil Rate Band.
- The Residence Nil Rate Band.
- Transfers between spouses and civil partners, which are generally exempt from Inheritance Tax.
- Charitable exemptions.
Understanding how these reliefs work together is essential. A comprehensive review can help ensure opportunities are not overlooked and that your estate plan continues to reflect both current legislation and your family’s objectives.
Strategies to consider now
Although the rules are changing, there are still a number of effective planning options available.
1. Lifetime gifting
Making gifts during your lifetime can reduce the value of your estate for inheritance tax purposes.
Many gifts become exempt if you survive for seven years after making them. This can be particularly effective where succession plans are already well established and the next generation is ready to assume greater responsibility.
However, gifting is not simply about reducing tax. You should carefully consider whether you can comfortably afford to give assets away and whether you are happy to relinquish control. Depending on the type of asset involved, there may also be Capital Gains Tax implications that require specialist advice.
2. Trust planning
Trusts continue to play an important role in estate planning.
They can allow assets to be passed on in a controlled way while helping to protect wealth for future generations. Trusts may also provide flexibility where beneficiaries are young or where family circumstances are more complex.
As trust taxation is highly technical and the rules continue to evolve, professional advice is essential to ensure any trust is structured appropriately.
3. Reviewing pensions and investments
Pensions have traditionally been an efficient way to pass wealth between generations. However, proposed changes mean that from April 2027, unused pension funds are expected to become part of an individual’s estate for inheritance tax purposes.
This makes it even more important to review how different assets are used during retirement.
ISAs, investment portfolios and pensions each receive different tax treatment. Drawing income from one source rather than another could have a meaningful impact on the overall value ultimately passed to your beneficiaries.
A carefully considered withdrawal strategy can therefore become an important part of estate planning.
4. Reviewing ownership structures
For business owners and farming families, it may be appropriate to review how assets are owned.
This could include:
- Reviewing partnership arrangements.
- Considering company share structures.
- Updating shareholder agreements.
- Assessing whether ownership remains aligned with long-term succession plans.
In some cases, relatively modest structural changes made well before they are needed can improve both tax efficiency and business continuity.
Common estate planning mistakes
One of the biggest risks is assuming existing arrangements remain suitable simply because they worked under previous legislation.
Common mistakes include:
- Delaying planning until retirement.
- Assuming an old will remains appropriate.
- Failing to obtain updated business or land valuations.
- Making gifts while continuing to benefit from the assets, which may prevent the gift from being effective for inheritance tax purposes.
- Not considering how business succession and tax planning work together.
- Waiting until legislation is close to taking effect before seeking advice.
The earlier planning begins, the more options are usually available.
A practical checklist
If these changes may affect you, now is a good time to:
- Obtain an up-to-date valuation of your business or agricultural assets.
- Review your existing will and estate plan.
- Consider whether your succession plans remain appropriate.
- Review ownership structures with your professional advisers.
- Assess whether lifetime gifting or trust planning could be suitable.
- Understand how your pensions, investments and other assets fit into your overall estate planning strategy.
Taking these steps now provides greater flexibility than waiting until the new rules are already in force.
Why early planning matters
April 2026 may seem some time away, but effective estate planning rarely happens overnight.
Some strategies require careful implementation, while others depend on timescales that cannot easily be accelerated. Beginning discussions now allows decisions to be made thoughtfully, rather than under unnecessary time pressure.
Most importantly, early planning provides reassurance. It allows you to make informed decisions that support both your family’s future and the legacy you have worked hard to build.
Why choose Fogwill & Jones?
At Fogwill & Jones, we understand that estate planning is about far more than tax.
Whether you own a family business, manage agricultural land or have built significant wealth over many years, our role is to help you create a strategy that reflects your personal values and long-term objectives.
Working alongside solicitors and accountants where appropriate, we provide clear, practical advice that helps you navigate complex legislation with confidence.
Our aim is simple: to help protect your wealth, support those who matter most to you and give you confidence that your plans remain fit for the future.
Start the conversation today
The changes coming into effect from April 2026 present an important opportunity to review your existing arrangements.
Even if no immediate action is required, understanding how the new rules could affect your estate will help you make informed decisions with confidence.
If you would like to discuss your circumstances or arrange a review of your estate planning strategy, our advisers would be pleased to help.