What the Reforms Entail
- Starting 6 April 2026, for combined agricultural and business assets over £1 million, relief rate will fall from 100% to 50% on the portion above £1 million. Assets up to that threshold retain full relief. (gov.uk)
- Additionally, inheritance tax (IHT) exemptions and number of estates affected are limited—primarily wealthy estates (~2,000 estates annually) will bear additional tax. (gov.uk)
Implications for Estate Planning
- Estates previously expecting little or no IHT due to full relief now may face IHT at 40% on relief-denied portions.
- Estate holders need to assess combined agricultural & business holdings to see if they breach the £1m threshold.
Actionable Steps
- Valuation review: Obtain up-to-date valuations for business and agricultural property assets.
- Threshold management: If holdings exceed £1m, consider restructuring or giving away assets below threshold levels during lifetime.
- Spouse/civil partner reliefs: £1 million allowance may be transferrable between spouses/civil partners to maximise relief. (gov.uk)
- Use of trusts & lifetime gifting: Review whether lifetime gifts or trusts can help mitigate exposure, while being mindful of new reporting or trust-based rules.
Example
John and Mary jointly own a farm (Agricultural Property Relief) and a small business. Business holdings valued at £1.5 million, farmland at £800,000. Combined value is £2.3 million, so the first £1 million gets 100% relief, the remaining £1.3 million gets only 50% relief. IHT payable on the unreduced portion could be substantial.
Key Takeaways
- These changes are effective 6 April 2026—any estate plans made before then should account for the new relief limitations.
- Groundwork now (valuations, transfers, structuring) can preserve more of estate value.
- Professional advice from tax or estate planners strongly recommended for those near or above these thresholds.