Changes to Inheritance Tax: Planning Ahead for the New Relief Caps
Major changes are on the horizon for Inheritance Tax (IHT) — and they could have significant implications for business owners, landowners, and families looking to pass on wealth.
From April 2026, the government will introduce a new £1 million cap on combined Business Property Relief (BPR) and Agricultural Property Relief (APR), which will limit the amount of business or farm assets that can be passed on free of IHT. Then, from April 2027, unused pension funds and certain death benefits will also be brought within the scope of IHT.
Now is the time to start planning.
What’s Changing?
1. Business and Agricultural Property Relief Cap – April 2026
Currently, business owners and farmers can benefit from up to 100% IHT relief on qualifying business and agricultural assets, regardless of value. However, from April 2026:
The first £1 million of qualifying combined business and agricultural property will still receive 100% IHT relief.
Any value above £1 million will only be eligible for 50% relief — meaning the remaining 50% will be subject to IHT at 40%.
The £1 million cap will apply per person, not per asset or per property.
This could significantly increase the IHT liability for larger estates — particularly family businesses or farms that have been passed down for generations.
2. Unused Pension Funds and Death Benefits – April 2027
Currently, many pension pots can be passed on free of IHT, especially if the individual dies before age 75. From April 2027, unused pension funds and lump-sum death benefits will form part of the deceased’s estate for IHT purposes.
This change could expose more estates to IHT and increase the tax burden on beneficiaries who might have expected to inherit pension assets tax-free.
Who Will Be Affected?
Family businesses and farms with assets worth more than £1 million
Entrepreneurs and landowners relying on BPR or APR to mitigate IHT
Retirees expecting to leave unused pension savings to their heirs
High-net-worth individuals who have not reviewed their estate plan in the past year
What Should You Do Now?
These changes don’t come into effect until April 2026 and 2027, but strategic planning takes time. Here’s how you can prepare:
Review the value of your estate
Work with your accountant or financial adviser to assess the current value of your business, land, pension assets, and personal wealth. This will help you understand your potential IHT exposure under the new rules.
Consider early succession planning
Gifting assets during your lifetime may help reduce the taxable value of your estate. Keep in mind that gifts may still be subject to IHT if you die within seven years of giving them.
Explore trust planning
Certain types of trusts can help manage IHT exposure and protect family wealth. Trusts may allow you to retain some control over assets while reducing the IHT liability on death.
Revisit your pension strategy
If your retirement plan involves leaving a significant pension to your heirs, you may need to reconsider how those funds are structured and distributed.
Reassess your business structure
Speak to your accountant about whether restructuring your business could help you maximise available reliefs or spread assets between spouses or family members to optimise allowances.
How Exchange Accountants Can Help
At Exchange Accountants, we help families and business owners across Northern Ireland and the UK plan for the future — with proactive, tailored advice.
We can:
Review your estate and calculate potential IHT liabilities under the new rules
Help restructure your assets to maximise reliefs and allowances
Work alongside legal advisers to implement tax-efficient succession strategies
Monitor legislation changes and update your plans accordingly
The new IHT caps could significantly impact the next generation — but with smart planning now, you can protect your legacy and reduce the tax burden for your loved ones.
Talk to Us
If you’re concerned about how the 2026/2027 IHT changes might affect your family or your business, book a consultation with our team today. We’ll help you plan ahead — and make informed decisions that benefit both you and your heirs.
