The government has recently announced changes to Agricultural and Business Property Relief for individuals, which will come into effect on 6 April 2026. John-Paul Dennis, Head of Wills, Trusts and Probate at Jackson Lees provides key information that business owners need to know when it comes to estate planning.
For more information on how we can help plan for your future, please give us a call.
What changes are being made?
Previously, business or agricultural property which formed part of an estate was eligible for 100% relief on inheritance tax (IHT), with no cap on the value of qualifying assets. However, under the new regulations, only the first £1 million of these assets will continue to benefit from 100% relief.
Assets exceeding this threshold will qualify for relief at a reduced rate of 50%. This means that the effective IHT rate on qualifying Business or Agricultural assets over £1 million will be 20%.
Personal estate assets and those not eligible for relief will remain subject to the existing IHT rates of 40% or 36%, depending on your Will planning.
How do I protect my estate from the increased inheritance tax?
It is important to review your Will to make sure your estate is adequately protected from a higher IHT liability. At Jackson Lees, we have observed an increasing number of business owners and farming clients seeking our assistance to mitigate these impending changes. Your Will or estate planning could now be outdated and certainly may need to be modified to better protect your estate from having to pay a larger portion of IHT upon your death.
From 6 April 2027, most pension funds will be included within an estate for IHT purposes, impacting defined contribution (DC) pension schemes. For instance, if you have a Self-Invested Personal Pension (SIPP) that pays out a cash lump sum to your nominee upon your death, this sum will now be subject to IHT at 40%. Any remaining amount, after settling the IHT owed to HMRC, will be taxed at the marginal tax rate of your nominee, effectively introducing two forms of taxation on your pension.
Jackson Lees can help
At Jackson Lees, we work closely with clients, their accountants, and financial advisors to develop tailored plans that address these changes and safeguard your future. If you have any concerns or wish to review your estate planning, please do not hesitate to get in touch to book an appointment with a member of my team today.
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