Changes to Inheritance Tax

HMRC’s consultation on the Inheritance Tax (IHT) changes announced in Rachel Reeves October 2024 Budget statement has now ended providing further clarity on the changes to be introduced from April 2026.

Given these changes will significantly reduce the reliefs available on business and agricultural assets, if your estate includes farmland and/or trading businesses, it is important that you review your will, estate planning strategy, and asset structure now. 

Actions we recommend

• Review your will and estate plan 

Existing Wills may no longer be tax efficient. Consider joint ownership structures, the use of trusts, and updated succession strategies.

• Obtain formal valuations

With new relief caps in place, accurate and HMRC-defensible valuations of agricultural and business assets are essential.

• Consider lifetime gifting and restructuring 

Transferring assets now could help reduce future liabilities — but this must be balanced with considerations around control, timing, and family dynamics.

• Plan for liquidity 

If your estate is likely to face an IHT bill, consider whether there are enough liquid assets or financing options in place to avoid the forced sale of key assets.

• Maintain detailed and accurate records 

It is important that detailed records are maintained detailing property and asset held and their use. 

• Consider whether trust planning is appropriate for your circumstances 

There is an opportunity where it is appropriate to undertake trust planning prior to April 2026 to protect assets and family wealth whilst mitigating exposure to IHT through the use of trusts, maximising the BPR and APR reliefs currently available.   

How Cottons can help

We are already working with many clients to restructure their estates, revisit wills, and assess exposure under the new APR and BPR limits. We encourage you to book a planning meeting with our team as soon as possible. 

We will also be hosting IHT-focused seminars in September 2025 to guide clients through the new rules and answer common questions.  

What’s changing?

As of April 2026, two major IHT reliefs – Agricultural Property Relief (APR) and Business Property Relief (BPR) – have been restricted: 

• A combined £1 million cap will apply to assets qualifying for 100% APR or BPR. 

• Any value above £1 million only qualifies for 50% relief, rather than the full 100%. 

• Alternative Investment Market (AIM) shares will only attract 50% BPR, with no access to the £1 million full relief cap.

• Unused allowances are not transferrable between spouses or civil partners. 

• The £1 million allowance is not a single lifetime allowance thus providing an opportunity for lifetime planning.  

These changes affect both lifetime gifts and transfers on death, creating new considerations for farmers, landowners, and business owners alike. 

Why this matters

The previous system offered up to 100% relief on qualifying business and agricultural assets — often allowing these to be passed on without an IHT charge. Now, the new thresholds may leave many estates facing significant tax liabilities. 

This is especially problematic where the estate is asset-rich but cash-poor, such as farms and family businesses, potentially forcing the sale of assets to cover tax. 

If you need more background information on what Inheritance Tax is, our guide on inheritance tax and securing your legacy can help.

To book a review or register your interest for a seminar, please email enquiries@cottonsgroup.com.