From 6 April 2026, significant changes to inheritance tax (IHT) rules will come into force that could materially affect UK business owners, farming families, and high net worth individuals. The government's reforms to business property relief (BPR) and agricultural property relief (APR) represent the most substantial shift in wealth succession planning in over two decades.

This article explores what's changing, why these reforms matter, and what affected individuals may want to consider before the new rules take effect.

What's changing on 6 April 2026?

The current system provides 100% relief from IHT for business property and agricultural property held for at least two years before death. This means that qualifying business assets and farmland typically pass to beneficiaries entirely free of inheritance tax.

From April 2026, the government is introducing a "new allowance" system. Here's how it will work:

The £2.5 million allowance

Business property and agricultural property will benefit from a combined lifetime allowance of £2.5 million per individual. Within this allowance, relief remains at 100%, meaning assets up to £2.5m will still pass entirely free of IHT.

For assets exceeding this threshold, the position changes. The relief reduces to 50%, which is equivalent to an effective IHT rate of 20% on the excess (since IHT is charged at 40% on estates above the nil rate band).

The allowance is transferable between spouses

One area worth understanding is how the new allowance works for married couples and those in civil partnerships. If one spouse dies without fully utilising their £2.5m allowance, the unused portion can be transferred to their surviving spouse.

This means a couple could benefit from a combined allowance of up to £5 million (£2.5m each), with assets within this combined envelope passing entirely free of IHT. This provision offers important planning opportunities for joint business owners and farming partnerships.

AIM shares: the end of full relief

Shares quoted on the Alternative Investment Market (AIM) currently benefit from 100% BPR, making them particularly attractive from an IHT perspective. From 2026, this changes.

AIM shares will no longer qualify for full relief under BPR. Instead, they will receive 50% relief, resulting in the same effective 20% tax rate on amounts above the £2.5m allowance. This change may prompt investors to reconsider their AIM holdings and broader wealth succession strategies.

Who is affected and why it matters

Business owners

For business owners whose company is valued below £2.5 million, the April 2026 changes may have limited immediate impact. However, this change means that estate planning assumptions of the past two decades, where the business could pass entirely tax-free, no longer apply once thresholds are exceeded.

Business owners with enterprises worth significantly above £2.5 million now face a different planning landscape. The effective 20% IHT rate on amounts above the allowance may influence succession decisions, whether to accelerate business sales, restructure holdings, or implement gifting strategies.

Farming families

The agricultural sector faces particular challenges under the new rules. Farmland valuations have risen substantially, and many family farming operations exceed £2.5 million. The shift from full relief to 50% relief above the allowance could threaten the viability of passing farms intact to the next generation.

For affected families, this change means that tax planning around succession becomes more complex and potentially more urgent. Strategies such as periodic gifting, holdover relief elections, or business restructuring may warrant serious consideration.

AIM investors

Investors who have accumulated significant AIM shareholdings as part of a tax-efficient estate plan will need to reassess. The withdrawal of full relief means affected individuals may want to explore options such as diversifying holdings, timing disposals strategically, or reviewing the role of AIM investments within broader wealth planning.

Practical implications and timeline

This change means that effective planning windows exist now, before 6 April 2026. Individuals with significant business or agricultural assets may want to consider a range of strategies:

Gifting

Outright gifts to beneficiaries made now fall outside the estate and reduce the value liable to IHT at death. However, gifts are subject to a seven-year survival rule (with taper relief if the donor survives more than three years). Individuals with sufficient assets may want to explore phased gifting over time.

Business restructuring

Some business owners may explore structures that reduce the taxable value of holdings, such as creating trusts, implementing share schemes, or adjusting equity between family members. These moves require careful tax and legal advice to be effective.

Spousal planning

Couples with jointly owned businesses or farms may want to ensure that both spouses' £2.5m allowances are optimised. This may involve reviewing current ownership structures or updating wills to ensure maximum use of both allowances.

Looking ahead: the pension IHT change (April 2027)

Worth noting is that a further significant IHT change is scheduled for April 2027. From that date, pension benefits will be brought within the scope of IHT, subject to limited exceptions. This development, combined with the 2026 business relief changes, reinforces the importance of comprehensive estate planning sooner rather than later.

Key takeaways

The 2026 IHT changes to business and agricultural property relief represent a significant tightening of wealth succession rules. Key points to remember:

  • A £2.5m allowance per individual (£5m for couples) continues to provide 100% relief; assets above this threshold receive only 50% relief.
  • AIM shares lose full relief and will be subject to the 50% relief rate.
  • Planning opportunities exist now, before April 2026; affected individuals may want to explore gifting, restructuring, or other strategies.
  • A further change affecting pensions comes into force in April 2027.

What this means for you

If you own a business, farmland, or significant AIM shareholdings, the 2026 changes may be relevant to your circumstances. Many affected individuals are reviewing their current estate planning arrangements and considering what options may be available.

At IFA Connect, our specialist advisers have deep experience in business succession, farm planning, and wealth structuring for HNW individuals. We can help you understand how these changes affect your specific situation and identify proactive strategies tailored to your goals.

Get in touch today to arrange a confidential conversation about your inheritance planning. Contact IFA Connect to find a specialist adviser in your area.

Disclaimer

This article is for informational purposes only and does not constitute financial advice. Tax rules can change. For advice tailored to your circumstances, speak with a qualified financial adviser.