Key Reforms from 6 April 2026
The UK government is reforming Inheritance Tax (IHT) reliefs for agricultural property and business property:
- 100% relief cap: On combined agricultural and business property where 100% relief will be limited to £1 million per individual. Over that amount, relief drops to 50%. (gov.uk)
- Transferability between spouses/civil partners: Unused portions of this relief can be transferred to a surviving spouse, combining to £2 million total relief for couples. (gov.uk)
- Changes to AIM shares: Relief on shares in Alternative Investment Market companies will be reduced—relief drops from 100% to 50%. (accountingweb.co.uk)
Who Is Affected Most
- Owners of family farms or businesses whose value exceed the individual £1 million cap.
- Property-rich estates, business owners with livestock, farms, or trading companies.
- Investors and shareholders with AIM holdings looking for relief on inheritance.
Strategic Tips for Estate Planning
- Use inter-spousal transfers: If part of the BPR/APR relief is unused at first death, transferring unused relief can yield up to £2 million combined relief for couples. (lgtwm.com)
- Gift assets prior to April 2026: Transferring parts of agricultural or business property before reforms apply could preserve relief.
- Consider AIM shares sooner: Relief rate cuts for AIM investments make timing critical for inter-generational transfers.
- Budget for the 50% relief beyond £1 million: Estates exceeding that cap will now face IHT on half the property value above £1 million—so plan the liquidity accordingly.
Example Illustration
Let’s say Alice owns a farm valued at £1.5 million. Under the new rules:
- First £1,000,000 receives 100% relief → £0 IHT payable.
- Remaining £500,000 only gets 50% relief, so £250,000 enters the IHT chargeable estate.
- If Alice is married, her unused relief portion (if any) transfers to her husband, allowing the couple to shield more jointly.(gov.uk)
If she held shares in an AIM company worth £200,000,
- Previously, that may have been 100% relief;
- Now only 50% relief applies → increasing IHT exposure significantly.(accountingweb.co.uk)
High-Level Action Plan
- Get valuations of your business/farm/AIM assets now—knowing whether you’ll exceed the new £1 million cap.
- Consider structuring gifts/transfers before 6 April 2026 to preserve full relief under current rules.
- Keep detailed records of ownership, role, and eligibility conditions.
- Engage estate and tax planning legal professionals familiar with IHT, especially for cross-generational planning.