Overview of Upcoming IHT Relief Reforms
From 6 April 2026, reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) will change how estates and trusts claiming reliefs are taxed. Key changes include:
- A £1 million allowance for the combined value of qualifying agricultural and business property in an individual’s estate—or in trusts—qualifying for 100% relief.(gov.uk)
- Above that £1 million, relief will apply at 50% instead of the existing 100%.(gov.uk)
- The 100% rate is reduced to 50% for shares traded on recognised stock exchanges but not listed, and certain foreign exchanges not recognised.(gov.uk)
- Estates and trusts will have the option to pay IHT by instalments over 10 years, interest-free, for all property eligible for APR or BPR.(gov.uk)
Who Will Be Affected?
- Large estates with significant holdings in agricultural land or private business assets will see higher IHT exposure. Estates over £1 million in qualifying property lose some relief.
- Shares traded on certain exchanges (e.g., AIM or foreign unrecognised exchanges) now incur only 50% relief in many cases.
- Trust property is impacted, especially trust property settled on/after 30 October 2024, or subject to 10-year anniversary or exit charges post 6 April 2026.(gov.uk)
Strategic Actions to Consider
- Use the £1 million allowance fully: ensure qualifying property is valued and accounted for so you maximise the relief.
- If property is likely to exceed the threshold, plan whether to pass more value via lifetime gifts or adjust estate structure.
- Check status of shares and their trading/listing status to determine relief rate.
- Trusts should be reorganised or transferred cautiously, mindful of the anti-fragmentation rules and how allowance applies apportionately among trusts.
- Installment option: use it to improve cash flow post-death or on trust exit/anniversary charges.
Case Study Example
Scenario: Farmer Mary owns a farm and business assets totalling £1.5 million. Of that, £1.2 million qualifies for APR or full BPR (private non-listed shares). Under reforms:
- First £1 million receives full 100% relief.
- Remaining £200,000 of qualifying property receives 50% relief, meaning £100,000 is deemed relievable, £100,000 subject to half relief.
If Mary had placed assets into a trust established after 30 October 2024, these thresholds and rules apply similarly at exit or 10-year anniversary.
Entity Setup Implications
- Family companies holding qualifying agricultural land should review ownership structure—company share listing status may affect BPR relief.
- Trusts: structure and settlement dates matter—property settled before or after key dates (30 Oct 2024, 6 April 2026) have different treatment.
- Ensure valuation and documentation are robust if passes through business assets or trust distributions.
Compliance Checklist
- Identify property assets qualifying for full vs partial relief.
- Assess share status if traded or listed/unlisted.
- Determine whether trusts or estates need to file or report differently under new forms.
- Monitor HMRC guidance and legislation drafts published ahead of April 2026.
Conclusion
These IHT relief reforms aim to target reliefs more fairly, ensuring huge estates cannot exploit unlimited reliefs while protecting family farms/businesses. Timely planning—especially for trusts and large estates—is essential to make the most of the new rules.