A now-closed consultation by HRMC has provided further details about the Inheritance Tax (IHT) allowance for business and agricultural properties in the UK.
From 6th April 2026, to qualify for 100% relief, the total value of a property must be no higher than £1 million, while any eligible assets above this value will receive a reduced relief rate of 50%.
Under the new relief threshold, as an example, a business valued at £5 million could become liable for an additional £800,000 tax bill from next spring. This makes it crucial to get ahead in adapting to the upcoming changes to the £1 million IHT allowance for individuals.
Keep reading to learn more about how these changes will affect future estate planning.
How will business and agricultural IHT reliefs work?
Any lifetime transfers of business or agricultural property made within 7 years of death will use up the £1 million allowance. Similar to the nil rate band, the allowance will be renewed every 7 years.
Business and agricultural properties that only qualify for the 50% relief rate, including Alternative Investment Market (AIM) shares, won’t use up the full allowance.
While spouses and civil partners will qualify for their own allowances, any unused amount of each £1 million allowance won’t be transferable like the nil rate band.
IHT planning for business and agricultural properties
With unrestricted business and agricultural relief currently available, planning for IHT is important to ensure that 100% relief will still be available after the rules change.
From next year, there will be more incentive to make lifetime gifts if the allowance isn’t enough to cover the value of a business or agricultural property, which has implications for Capital Gains Tax (CGT).
Alternatively, putting a substantial gift into trust could be worthwhile – for example, gifting a £2 million agricultural property into trust would result in a lifetime IHT bill of just £35,000.
However, when making a lifetime transfer of such a property to a spouse or civil partner, this relief will only be available after the property has been held for 2 years.
Get help with IHT for a business or agricultural property
Annex A of HMRC’s Inheritance Tax reliefs consultation features several case studies illustrating how the allowance will be applied – but if you need more help managing your tax liabilities, you may want to speak to professionals like our accountants in Barnsley.
To discuss IHT planning with the team here at gbac, give us a call on 01226 298 298 to arrange a consultation, or send an email to info@gbac.co.uk and we’ll be in touch.