How Has Inheritance Tax Changed?

On 21 July 2025 the draft legislation for the Finance Act 2025-26 was published and it confirms that the Labour Government wishes to proceed with its proposed Inheritance Tax (IHT) reforms, which come into place from April 2026.

As a result of those reforms, the tax net will widen to capture many more estates to Inheritance Tax.

Indeed it is noted on the official Gov.uk website; “Approximately 38,500 estates will pay more Inheritance Tax than would previously have been the case.”

The main changes concern:

• Agricultural Property Relief (APR) and Business Property Relief (BPR); and

• Pensions

Agricultural Property Relief (APR) and Business Property Relief (BPR)

For many years, 100% Agricultural Property Relief (APR) and 100% Business Property Relief (BPR) have been available to completely exempt agricultural and business assets from IHT where they meet the relevant conditions.

Whether an individual owns unquoted shares in a trading company worth £100 or £100 million on death, under current rules they could pass to the beneficiaries of the estate completely free of IHT. Furthermore, those assets would be revalued to the Open Market Value at death, so less Capital Gains Tax will be payable on a future sale of those assets.

Our advice in such circumstances has been to retain qualifying agricultural and business property in your estate until the date of death to optimise these two valuable reliefs.

From 6 April 2026 a new £1 million allowance will apply to the combined value of property in an estate qualifying for 100% APR and BPR.

Any qualifying assets with value over and above £1 million will benefit from 50% APR or BPR which effectively halves the rate of IHT to 20%, but for many farms and businesses this could still result in a large IHT liability whereas under current rules there would be no IHT to pay.

The most concerning aspect of the changes is that the IHT charge is based on the Open Market Value of the deceased’s farming assets and shares in a business – the estate may owe IHT on the value of those assets without having sufficient cash available to meet the liability.

For agricultural property, it may result in the estate having to sell off some of the business’s most valuable assets, which in most cases will be land. For trading businesses, it may mean having to extract profits as dividends which attract additional tax or sell shares to outside investors.

Pensions

Under current rules it is possible for individuals to accumulate tax-free savings in their pension and leave their unused pension assets in discretionary schemes to be inherited by beneficiaries, free of IHT.

The draft legislation indicates that from April 2027 most unused pension funds and death benefits will be brought within the value of an individual’s estate for IHT purposes and will be exposed to 40% IHT.

Personal Representatives will be responsible for reporting and paying any IHT due on the unused pension funds and death benefits within six months of death.

For many individuals, these changes may mean a radical change to their later life planning strategy.

Inheritance Tax Planning

Many of us are comfortable paying tax on death providing our loved ones are cared for.

Caring for loved ones can mean different things to different people. For some of us it may be:

• The continuation of a thriving family business

• The gift of the family home free of tax

• Establishing a legacy for generations to come

(Or all three of the above!)

The most upcoming changes to the IHT rules may mean that your current plans are no longer suitable.

From our experience, it is clear that whether you are a high net worth individual or run your own business, tax is at the heart of most financial or succession plans.

A large, unexpected Inheritance Tax (IHT) bill can impact not just your bank balance but also your family, home and business.

An Inheritance Tax (IHT) and Financial Planning review are not luxuries, but underpin a thriving business and successful transfer of wealth to the next generation.

What can you do now to plan effectively?

From April 2026, many businesses, farms, and pension pots will face higher IHT bills under new rules.

For many individuals, these changes may mean a radical change to their later life planning strategy.

We believe an IHT and Financial Planning Review is invaluable to quantify how much of your estate will be subject to IHT and how much will be left over for your loved ones.

Robson Laidler’s tax advisors and financial planning experts would like to reassure people that tax strategies are available to manage these liabilities. We invite those affected to get in touch with our team who will assist you to navigate these new rules with an Inheritance Tax (IHT) review and succession planning advice.

So, if you own a business, have agricultural land, or want to protect your pension for your family, get in touch with us. We work with people just like you – helping them plan with confidence, protect their wealth, and secure their legacy.

Our tax and financial planning experts work together to give you a clear, joined-up strategy – from inheritance tax exposure to retirement planning.