As we head towards the end of the tax year, it is that time of year again when full consideration is being given to any final tax planning opportunities for the current tax year to maximise reliefs. Whether that be making pension contributions to utilise annual allowances, trust distributions to make use of beneficiaries’ personal allowances or consideration being given to profit extraction from companies.

Unlike in many previous tax years where Inheritance Tax (IHT) rules have remained largely unchanged, for those who hold qualifying Business Property or Agricultural Property, 5 April 2026 is an important date for consideration of their IHT positions.

Where once these reliefs were very favourable, in some cases enabling significant values of land and shares in companies to be passed to the next generation free of IHT, unexpected IHT liabilities may now arise on future deaths.

The restriction in reliefs will have an effect on both individuals and trusts.

What is changing?

From 6 April 2026, the 100% relief available to claim on the combined value of these qualifying assets will be capped, with 50% relief available of the value exceeding the cap. Following the release of draft legislation, further changes have been announced by the Government:

  • The cap on 100% relief has been increased from £1m to £2.5m.
  • The unused 100% cap will be available to transfer between spouses on death.

Who should consider reviewing their IHT positions ahead of 6 April 2026?

  • Those who hold qualifying Business Property or Agricultural Property with a combined value greater than £2.5m (or £5m when position considered jointly with spouse)
  • Trusts who previously qualified for 100% APR and/or BPR relief at the previous ten year anniversary and:
    • hold qualifying Business Property or Agricultural Property worth over £2.5million, or
    • no longer hold Business Property or Agricultural Property, or
    • have non-qualifying assets they wish to distribute from the trust.

Next significant changes to the IHT regime:

From 6 April 2027, most pension pots will no longer be exempt from IHT.
If you’re looking to mitigate your IHT exposure but are unsure what steps to take next, please get in touch with your usual contact at CT or personaltax@ct.me.