Inheritance tax changes – key facts to know before the April 2026 deadline
Why plan now for the inheritance tax changes expected in April 2026
Even with such major changes to inheritance tax reliefs (business property relief (BPR) and agricultural property relief (APR)) expected, and with time running out before the new rules are expected to apply, we are finding some affected individuals are reluctant to act. Assets such as a business or a farm, often represent a lifetime of work and passion and decisions of this importance should be made carefully and not rushed. There is also an uncertainty factor – the legislation is draft, and rumours abound of possible changes at the Autumn Budget.
However, the period up to 5 April 2026 offers a unique opportunity for those affected to explore alternative planning strategies before the rules change. Given the time it can take to evaluate options and implement any new planning decisions, those wishing to act before April should be already talking to professional advisers to maximise their chances of completing any planning in time. Those who have not yet started these conversations, should do so without delay.
What’s changing - the inheritance tax relief cap explained
From 6 April 2026, individuals will be subject to a £1m cap on the combined value of assets eligible for agricultural property relief and business property relief. The value of qualifying assets which fall within that allowance will benefit from 100% relief from inheritance tax.
However, the value of qualifying assets exceeding this threshold will only quality for relief at 50%. As a result, a significant portion of the value of farms and businesses may become subject to an effective inheritance tax rate of up to 20%. Assets which currently benefit from relief at the 50% rate will continue to do so, without affecting the availability of the £1m allowance for other qualifying assets.
How to prepare for BPR and APR Changes - key actions
With this in mind, we’ve outlined some common considerations and actions that could help you assess the potential impact. This is not intended as advice, and specialist tax and legal guidance should always be sought before taking any action.
For example, individuals may wish to review their expected inheritance tax position post 6 April 2026 if business property relief (BPR) and agricultural property relief (APR) is reduced to 50% (after the first £1m).
They should also think about where any tax bill would fall. For example, will it be on the estate or on trustees?
Those with business assets might find it worthwhile to review their qualifying status to ensure it remains intact, particularly where investments are held within the business or high cash balances could restrict the level of relief available.
Where assets are illiquid, individuals may want to think about how any liability might be paid. For example, is borrowing an option, or insurance should be explored?
Where the qualifying asset consists of company shares, individuals should assess whether the company will have sufficient reserves and cashflow to pay a dividend to shareholders or fund a share buyback to enable them to meet any tax liability.
Where the assets are held in trust, individuals and trustees should consider whether the trustees will have, or be able to raise, the funds to pay any future tax liabilities or whether the settlor may wish to add further funds.
When passing on a business or farm to the next generation, there is much to consider beyond tax. However, for individuals where this is the ultimate intention, thought should be given to whether to make an outright gift or place assets into trust. In either case, there are considerable tax advantages to acting quickly, particularly where a trust is being considered. Where assets are being gifted, you may also need to consider possible capital gains tax implications.
Individuals may wish to review whether the current business or farm structure remains appropriate, or if a different structure would better suit future needs while helping to mitigate potential inheritance tax charges.
For example, they may wish to explore ways to ensure that future inheritance tax liabilities can be paid without requiring the company to pay a dividend, which itself would be taxable. It may be that a different company share structure, or a broader ownership base is appropriate to ensure the business ownership reflects the involvement of the whole family. It is also important to join up any personal planning with the commercial objectives of the business, particularly if a future sale is being contemplated.
How we can help
We understand how important it is to get these decisions right and planning can make all the difference. If you’d like to discuss how these changes could affect you or your clients, contact your usual RSM adviser.