Our Wills and Probate Team considers what you need to know about Inheritance Tax (IHT) changes in 2026.
Whilst the main IHT thresholds will remain frozen until April 2031: namely:-
- The Nil Rate Band – £325,000
- The Residence Nil Rate Band – £175,000
- The IHT rate remains at 40%
several significant changes have come into effect as of 6 April 2026.
Agricultural Property Relief and Business Property Relief
Agricultural Property Relief (APR) and Business Property Relief (BPR) are IHT reliefs that can reduce, or even eliminate, the IHT due on qualifying agricultural or business assets when someone dies. This includes IHT that may arise on certain lifetime gifts of qualifying assets that become taxable on death.
Until now, qualifying assets could often pass 100% free of IHT, regardless of their value.
Instead, full relief will now be capped at £2.5m for each individual, with any excess attracting 50% relief.
There have been two significant changes since the measures were first announced in the 2024 Autumn Budget. The first was that any unused allowance will be transferrable between spouses and civil partners (announced in the 2025 Autumn Budget); and the second was that the allowance would be increased from £1m to £2.5m per person (announced on 23 December 2025).
Changes to AIM shares
Until now, ‘unlisted’ shares, including qualifying Alternative Investment Market (AIM) shares could attract 100% Business Property Relief (BPR).
Instead, BPR on these shares will now reduce from 100% to 50%. This therefore means that only half the value of the AIM shares will be disregarded for IHT purposes, providing all conditions are met. In practice, this effectively means that this change creates a 20% IHT charge on qualifying AIM investments at death.
Looking Ahead – Pensions
At present, individuals can accumulate unlimited tax-free savings in their pension, draw on other means to fund their retirement and leave their unused pension assets to be inherited by beneficiaries without any Inheritance Tax charge.
From 6 April 2027, all unused pension funds and death benefits will be brought into a person’s estate for IHT purposes on death.
For many families, particularly those with land-rich or asset-heavy businesses, the above changes could result in a significant IHT bill where there may not have been any IHT expected previously.
These changes mean that it is essential to:
- Review the value of your assets
- Revisit your Wills and succession plans
- Consider whether the changes will have an impact on the Inheritance Tax position of your estate.
Contact our Wills and Probate Team on 01743 248545 (Shrewsbury) or 01948 663361 (Whitchurch), or complete a Contact Form.
