Inheritance Tax Changes | Thorntons Solicitors

Redefining your legacy. Inheritance tax is changing.

Inheritance Tax rules changed in April 2026, with further pension changes due from April 2027. These reforms may affect farmers, business owners, families with significant pension wealth, and individuals with UK and overseas assets.

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Inheritance Tax planning has changed significantly following reforms first announced in the Autumn Budget 2024. From 6 April 2026, new limits apply to Agricultural Property Relief (APR) and Business Property Relief (BPR). From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of a deceased person’s estate for IHT purposes.

For people in Scotland, these tax changes should be considered alongside Scots succession law, including legal rights, executry administration and confirmation.

What are the main changes?

From 6 April 2025, domicile and deemed domicile rules for IHT were replaced by long-term UK residence rules.
From 6 April 2026, qualifying agricultural and business property can now only receive 100% relief on values up to £2.5 million.
For married couples or civil partners, the available allowance may be increased to up to £5 million.
Once the £2.5 million allowance is used, the rate of relief is 50% for qualifying assets, meaning an effective IHT rate of 20% on any values above the allowance.
AIM shares which formerly qualified for 100% relief, now only qualify for 50% relief and the £2.5 million allowance is not available for these assets.
From 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of a deceased person’s estate for IHT.

What will the proposed IHT reform mean for you?

Previously APR and BPR offered a very valuable shelter from IHT, with relief being available at a rate of 100% or 50%, depending on the type of asset and how it is held. In each case the relief was unlimited.
With the restriction of relief to £2.5m for assets which previously qualified for 100% relief, higher value estates which previously may not have had any IHT liability may now be faced with the charge. All businesses, whether trading or investment, are now faced with the possibility of an IHT charge arising on the death of an owner or on certain lifetime transfers, creating a liability that successors may struggle to fund.
The changes to pensions will likely create new tax exposures for people sitting on significant pension funds and will make the administration of deceased estates more complex than before.

6 April 2025

Long-term UK residence rules replaced the former domicile and deemed domicile rules for IHT.

6 April 2026

New APR and BPR limits apply. 100% relief is available up to £2.5 million on qualifying assets, with 50% relief applying once the allowance has been used.