09 Sep 2026
If you own a home, a business, a pension, or farmland, the Government’s recent changes to inheritance tax could affect how much of your estate actually reaches your loved ones. The rules have shifted more in the last two years than they have in a generation, and many families don’t yet know how it will affect them.
For most people, inheritance tax only kicks in when an estate is worth more than £325,000. That figure hasn’t moved since 2009, and it won’t move until at least 2030. With house prices where they are, a growing number of ordinary families are now caught by a tax that was once considered the preserve of the very wealthy.
Until recently, farmers and business owners had a significant advantage. Their qualifying assets could be passed on completely free of inheritance tax, regardless of value. From April 2026, that has changed. There is now a £1 million cap on how much business or agricultural property can be fully sheltered from tax. Anything above that cap is taxed at an effective rate of 20 per cent.
For a farming family with land worth several million pounds, this can mean a tax bill of hundreds of thousands of pounds — often with no obvious way to pay it without selling the land itself.
The same month also brought bad news for investors who held shares on AIM, the London stock market for smaller companies. These were popular precisely because they qualified for full inheritance tax relief after just two years of ownership. That relief has now been halved, so what was once effectively an inheritance-tax-free investment now carries a tax charge.
Perhaps the biggest change of all is still on the way.
From April 2027, pension funds will be brought into the calculation of someone’s taxable estate for the first time. For years, leaving wealth inside a pension was one of the most effective ways to pass money to children or grandchildren without inheritance tax. That advantage disappears next year. Anyone who has built up a substantial pension pot needs to rethink how that wealth will be passed on.
The good news is that careful planning can still make a very significant difference. Couples, for instance, each have their own £1 million allowance for business and agricultural property — but only if the assets are owned between them in a way that makes use of both allowances. Reorganising ownership between spouses now, while the opportunity exists, can double the amount protected from tax. Similarly, gifts made more than seven years before death fall outside the estate entirely, which means starting that clock early can be enormously valuable.
For those with pensions, the next eight months matter. Pension funds passing on death before April 2027 still fall outside the taxable estate under the old rules. It is worth taking advice now on whether it makes sense to draw down some of that wealth during your lifetime and redirect it — whether through gifts, trusts, or other structures — rather than leaving it sitting in a pension that will soon attract a tax charge.
None of this means that inheritance tax planning has become impossible. But it does mean that arrangements put in place before October 2024 may no longer work as intended, and
that waiting to review them is a risk in itself. If you have a will, a pension, a business, or agricultural land, now is the time to sit down with a solicitor and look at your position with fresh eyes.
This article reflects the law as at the time of publication. The pension death benefit changes take effect from April 6 2027.
If you’d like to find out more, please contact Sherrards’ Private Wealth team.
Abroo Khan, solicitor, abroo.khan@sherrards.com, 01727 832830
