Recent changes to Inheritance Tax (IHT) could affect more families, business owners and farmers than ever before.
Following the October 2024 Budget, the government announced significant reforms to the UK Inheritance Tax regime. Combined with frozen tax-free allowances and rising property values, more estates are likely to fall within the scope of IHT over the coming years.
That means reviewing your position now is more important than ever.
What's Changing?
Agricultural Property Relief and Business Property Relief
For deaths occurring after 6 April 2026, qualifying agricultural and business assets will continue to benefit from Inheritance Tax relief — but with new limits.
The first £2.5 million of qualifying assets will receive 100% relief from IHT. Any qualifying assets above that threshold will receive 50% relief.
Previously, these reliefs to qualifying assets were generally uncapped, so this marks a significant change for many business owners and farming families.
In December 2025, it was also confirmed that these reliefs will be transferable between spouses, meaning a married couple could potentially benefit from a combined £5 million allowance on second death
AIM Shares
Historically, AIM shares held for at least two years could qualify for 100% Inheritance Tax relief.
Under the new rules, this relief will reduce to 50%.
While the longer-term market impact remains to be seen, many commentators expect this change to influence investment decisions for those who have previously used AIM portfolios as part of their estate planning.
Pensions – Now Within Scope of Inheritance Tax
Another major change is that, from 6 April 2027, unused pension funds will generally be brought into the scope of Inheritance Tax.
Previously, pension funds would not usually form part of the taxable estate for IHT purposes (unless payable directly into the estate). Going forward, pension funds and the rest of the estate will be considered together when calculating whether IHT is due.
Pension trustees will still control distribution of the funds, but they can be asked to withhold up to 50% of scheme benefits to help meet any IHT liability attributable to the pension.
Transfers between spouses remain exempt, and death benefits from registered schemes may still qualify for relief in certain circumstances.
Although we are still waiting for full HMRC guidance, it is sensible to understand where your pensions are held and keep clear records. This can make things much easier for your executors when administering your estate.
Planning Points to Consider Now
With more estates likely to be affected by Inheritance Tax, proactive planning can make a real difference.
Some practical steps to consider include:
- Review your Will – make sure it still reflects your wishes and current circumstances.
- Check your pensions – know where they are held, who manages them, and whether consolidation may be appropriate.
- Review your assets – ensure property, business interests and investments have up-to-date valuations.
- Speak to your advisers – legal, accounting and financial advice should work together before any significant decisions are made.
Why Acting Early Matters
These changes mean that Inheritance Tax planning is no longer something only a small number of estates need to consider.
A review now can provide clarity, highlight planning opportunities and help ensure that family wealth, businesses and assets are passed on as effectively as possible for future generations.
If you would like to review your current position or discuss how these changes may affect you, please contact our Private Client team, who will be happy to help.
