December brought a major shift in inheritance tax planning. From April 2026, the first £2.5 million of qualifying business and agricultural assets will receive full relief—up from the £1 million originally proposed. While this increase is welcome, it doesn’t remove the need for careful planning. Assets above the threshold will only receive 50% relief, meaning inheritance tax could still apply.
This adjustment follows months of uncertainty and marks a significant change to earlier proposals. It affects both Business Relief (BR) and Agricultural Relief (AR), which means most business owners and farmers will need to review their succession plans. The higher allowance offers breathing room, but without proactive planning, families could still face substantial tax bills.
The good news? There’s still time to prepare. In this article, I’ll break down the changes in plain English and share practical strategies to help you protect your assets and secure your legacy. Acting early could make the difference between a smooth transition and a costly surprise.
What’s actually changing?
Here’s the key change in plain English: from April 2026, only the first £2.5 million of your qualifying business and agricultural assets combined will receive full inheritance tax relief. The threshold was only £1 million initially but this was increased to £2.5 million in December 2025. Any assets above this threshold will only get 50% relief, meaning they’ll face inheritance tax at 20% rather than being completely exempt.
This applies to both business assets (covered by Business Relief) and agricultural assets (covered by Agricultural Relief). The anti-forestalling provisions for business assets – those applying to transfers between 30 October 2024 and 5 April 2026 – also extend to agricultural assets.
The November 2025 budget introduced a new provision which allows for the transfer between spouses of any unused Business Relief and Agricultural Relief. This means that if your spouse passes away without using the £2.5 million allowance it can be transferred to you to be used on your death, even if your spouse has passed away before April 2026.
This means that you will be able to pass on up to £5 million of qualifying business and agricultural assets inheritance tax free.
Get prepared – it will make a huge difference
Before you panic, here’s the encouraging news. With proper forward planning, you can still significantly reduce your inheritance tax exposure. The window for action is narrowing, but it’s not closed.
However, and I cannot stress this enough, you need to act now. Waiting any longer will be too late to implement many of the strategies that could save your family substantial sums.
Three essential steps to take immediately
- Review your current structures
Take a comprehensive look at how your business or farm is currently structured. Are you the sole owner? Is it held in partnership? Do you have a limited company? Each setup has different implications for the new rules. - Update your documentation
Ensure all your business documentation accurately reflects your current situation. This includes partnership agreements, articles of association, and any trust deeds. Outdated paperwork could create unnecessary complications later. - Review (or create) your will
If you don’t have a will, now is absolutely the time to create one. If you do have a will, it likely needs updating to account for these new rules. This isn’t optional – it’s essential.
I understand that when you’re busy running a business or managing a farm, estate planning can feel like a luxury you don’t have time for. But given the short window we’re working with, this has become a priority that could save your family hundreds of thousands of pounds.
Lifetime planning strategies – A game-changer
Here’s where things get interesting. The new guidance confirms that the £2.5 million BR/AR allowance will refresh every seven years. This creates a powerful planning opportunity that many business owners and farmers haven’t considered before.
The seven-year gift strategy
You can now make lifetime gifts of up to £2.5 million of qualifying assets every seven years. This means you could potentially transfer company shares or farmland to family members or business partners, utilising this allowance multiple times over your lifetime.
This represents a significant shift in thinking. Historically, many business owners and farmers have held onto their assets until death to benefit from tax reliefs. Now, a proactive gifting strategy could be far more beneficial.
Overcoming common concerns with Trusts
I completely understand if you’re thinking, “But I’m not ready to hand over control to my children.”
Many parents share concerns about:
- Loss of control over the business
- Children who might not be ready for the responsibility
- Potential relationship breakdowns affecting the business
This is where trusts can be incredibly valuable. A well-structured trust allows you to:
- Retain control as a trustee
- Give your children time to gain experience
- Protect the business from potential future complications
- Still utilise the £2.5 million allowance
Think of it as a way to have your cake and eat it too – you maintain control whilst still achieving the tax benefits.
Why time is of the essence
The anti-forestalling provisions mean that certain planning strategies become less effective the longer you wait. Whilst the full changes don’t take effect until April 2026, the window for optimal planning is much shorter.
Every month you delay could reduce your options or the effectiveness of the strategies available to you.
Your next steps
If you’re feeling overwhelmed by all this information, that’s completely normal. Inheritance tax planning has never been simple, and these changes add another layer of complexity.
Here’s what I recommend:
- Don’t try to navigate this alone – the stakes are too high and the rules too complex
- Act quickly – the planning window is narrowing
- Consider all your options – lifetime gifts, trusts, and will updates all have a role to play
- Think long-term – this isn’t just about the next few years, but about securing your family’s future
How we can help
At DJH, we understand that every family’s situation is unique. Our Estate Planning team specialises in working with business owners and farmers to navigate exactly these types of changes.
We’ll work with you to:
- Assess your current position
- Identify the most effective strategies for your circumstances
- Implement the necessary changes whilst you still have time
- Ensure your succession plans remain robust for future generations
The changes coming in are significant, but they’re not insurmountable. With the right planning and expert guidance, you can still protect your family’s financial future and ensure your life’s work benefits the people you care about most.
