Time for an estate planning review?

Many business owners and farmers have already taken steps to mitigate the impact of changes to the inheritance tax (IHT) business and agricultural property reliefs (BPR and APR) that came into effect on 6 April 2026.

However, despite the increase in the 100% relief allowance to £2.5 million from the £1 million originally proposed, the changes are still having a material effect on prospects for family businesses and farms. If you have not already taken action, there are still some worthwhile steps to consider.

The relief cap applies to the first £2.5 million of combined agricultural and business property. The value of assets qualifying for APR or BPR above this limit will receive relief at 50%. Any unused allowance on a person’s death can be transferred to the estate of their surviving spouse or civil partner even if the business or agricultural property was owned solely by the surviving spouse or civil partner. The full £2.5 million allowance can also be transferred if the first death was before 6 April 2026.

Mitigation

There are some actions couples can take:

• Review your wills to make sure that your £2.5 million allowances are not wasted and that no unexpected tax charges will arise on the first death, especially if the value of assets qualifying for BPR or APR is more than £2.5 million.
• Consider lifetime gifts to your children. Gifts of any assets more than seven years before you die will escape IHT entirely. But don’t overlook capital gains tax – make sure the gift qualifies for holdover relief.
• You could set up a trust and make use of your £2.5 million allowances and £325,000 nil rate bands. A couple could potentially settle £5.65 million into trust tax free every seven years. Trusts have their own £2.5 million allowance.
• If, despite steps taken, an IHT charge might arise, you could take out insurance to cover the potential liability.

IHT, especially concerning business and agricultural assets, as well as trusts, can be complex. It is essential to take good professional advice.

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