John Benson
Head of Department, Partner
If you own a farm, a family business, or you simply expected to pass your estate on tax-free, the rules changed on 6 April 2026.
The 2026 inheritance tax changes are now law, and they reach further than many people expect. This update explains how the 2026 inheritance tax changes affect families, farms and business owners, and what each one means for estates here in East Sussex. In short, five things have changed. Agricultural and business property now qualify for full 100% relief only on the first £2.5 million per person, with anything above that taxed at an effective 20%. That £2.5 million allowance can now pass between spouses and civil partners, so a married couple can cover up to £5 million between them. Relief on AIM shares and other unquoted shares has been cut from 100% to 50%. From April 2027, unused pension funds will count as part of your estate. And the £325,000 nil-rate band and £175,000 residence nil-rate band stay frozen until April 2030, pulling more ordinary estates into the tax each year. The rest of this update takes each change in turn and sets out the practical steps worth taking now.
Hart Reade is a long-established East Sussex law firm, and our Wills, Trusts & Probate team helps families, farmers and business owners plan their estates and deal with probate. The changes were announced in the Autumn 2024 Budget, revised in December 2025, and are now law under the Finance Act 2026. This is general information rather than advice on your own circumstances, so please speak to us before you act.
This is the change that matters most to farming families and business owners.
Until April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) gave 100% relief from inheritance tax on qualifying assets, with no upper limit. A working farm or a trading company could, in many cases, pass to the next generation with no inheritance tax to pay at all.
Since 6 April 2026, there is a combined allowance of £2.5 million per person for the 100% rate. Qualifying agricultural and business assets up to that figure still pass free of inheritance tax. Anything above £2.5 million now attracts relief at 50%, which means the excess is effectively taxed at 20%.
The £2.5 million figure has its own history. The government first proposed a £1 million allowance, then increased it to £2.5 million in December 2025 before the rules became law. If you read about a £1 million cap last year, that figure is out of date.
For a sense of scale, take a farm or business worth £4 million held by one person. Around £1.5 million would fall above the allowance. At an effective 20% rate, that is roughly £300,000 of inheritance tax on assets that would previously have passed with nothing to pay.
Laura Mitchell, a partner in our Private Client team and a full member of STEP (the Society of Trust and Estate Practitioners), advises farming families and business owners on how the new cap applies to their assets, and on whether trusts or changes to ownership could keep more of the estate within the 100% band.
There is helpful news for married couples and civil partners. Any unused part of the £2.5 million allowance passes to the surviving spouse or civil partner, giving a couple up to £5 million of qualifying assets at the 100% rate between them.
This applies even where the first death happened before 6 April 2026. If a husband or wife has already died and did not use their allowance, the survivor’s estate can still benefit from the transfer.
The catch is that the transfer is not always as automatic as couples assume, and older Wills were often written to make full use of reliefs that no longer work the same way. A Will drafted five or ten years ago may now direct assets in a way that wastes part of the allowance. This is the kind of problem a review will pick up. All our team can regularly review Wills written under the old rules so that the allowance passing between spouses is not lost by accident.
If your estate includes shares listed on AIM, or other shares not quoted on a recognised stock exchange, the position has changed too.
These shares previously qualified for 100% business relief once held for two years. Since 6 April 2026, relief on them is cut to 50%, regardless of how long you have held them. In practice that means an effective 20% inheritance tax charge on an AIM portfolio passed on death.
Investors who built AIM holdings specifically for their inheritance tax treatment should review whether that approach still does what they want.
One further change is coming that is worth planning for now. From April 2027, unused pension funds are expected to count as part of your estate for inheritance tax.
Until now, leaving a pension untouched and spending other savings first has been a tax-efficient way to pass wealth on. That advantage is closing. If your retirement plan was built around keeping the pension intact for your beneficiaries, it is worth revisiting how you draw your income and which assets you spend first.
None of the above changes the standard allowances, but those allowances are not keeping pace with rising values.
The nil-rate band stays at £325,000 and the residence nil-rate band at £175,000, and both are frozen until April 2030. As house prices and asset values rise, more estates are pulled over the threshold each year without any change in the law. Frozen allowances and capped reliefs together mean inheritance tax now reaches families who never expected to pay it. Heather Smith, one of our partners, who has advised East Sussex families since qualifying in 1990, helps people work out whether their estate is now likely to face a bill and what their options are.
The changes are already in force, so there is little benefit in waiting. A few practical steps are worth taking.
Start by working out what your estate is actually worth today, including any farm, business interest, AIM shares and pension. Many people are surprised once property values are added up. Then look at your existing will, because Wills written before these changes may no longer pass assets the way you intended, and may waste part of the transferable allowance between spouses.
From there, it is worth reviewing whether lifetime gifts, trusts, or changes to how a business or farm is owned could reduce the eventual bill. These need care, because the rules on gifts and trusts are detailed and getting them wrong can cost more than it saves. Finally, check that you have a valid Lasting Power of Attorney in place, so that someone you trust can manage your affairs if you become unable to. Rebecca Murdock, based at our Polegate office, prepares Lasting Powers of Attorney and handles probate and Court of Protection matters for clients across the area.
Our Wills, Trusts & Probate team advises families, farmers and business owners from our Eastbourne, Hailsham and Polegate offices. We can review your current Will against the 2026 rules, explain clearly how the changes affect your estate, and set out the options for reducing inheritance tax where that is possible. Where a larger tax bill or a capped relief leads to disagreement within a family, Jacqueline Penfold, our litigation partner, advises on disputes over Wills and Inheritance Act claims.
Book a Will and estate planning review, or call our Wills, Trusts & Probate team for an initial conversation. We will tell you honestly whether the changes affect you and what, if anything, is worth doing about it.
Please note the above is for information purposes only and is intended to be a short summary. It should not be treated as a comprehensive guide and should not be acted on without qualified legal advice.
Please telephone the following numbers to arrange an appointment:
We will maintain complete confidentiality and discretion at all times.
