Farmers may have marched on Whitehall, but the April 2026 changes to inheritance tax and business relief affect far more than agriculture. These reforms could impact a wide range of families with business interests — whether that’s farms, private companies, or long-standing family firms.
From 6 April 2026, the tax position changes as follows:
- Each person will have a £1 million allowance for business-relievable assets
- Anything above that only qualifies for 50% relief
- This creates a 20% inheritance tax charge on the value above £1 million
- The spousal exemption remains — assets passing to a spouse or civil partner stay tax-free
While Agricultural Property Relief (APR) is technically a separate relief, the new structure applies in exactly the same way. The government’s reform also extends to investments listed on the Alternative Investment Market (AIM), which previously qualified for full relief after two years. From April 2026, these AIM holdings will only receive 50% relief — without any allowance threshold.
A real-world illustration
Let’s say a family-owned widget manufacturer is worth £10 million. It’s been in the same family for decades, employs dozens of people, and owns its own premises and equipment.
If shares worth £5 million are passed from the older generation to the younger generation on death, here’s what happens under the new rules:
- The first £1 million qualifies for 100% relief
- The remaining £4 million receives 50% relief
- That leaves £2 million exposed to IHT at 40%
- The result: £800,000 of tax, or a net effective rate of 16%
That tax has to be paid in cash. So unless there are liquid assets elsewhere, the options are limited: sell something, borrow, or restructure the business. This is where good planning really matters.
Is life assurance the solution?
A potential solution might be to insure against the liability, or to have appropriate legal agreements in place to manage succession. But these steps won’t be suitable for all businesses — and many haven’t yet implemented this more basic planning.
The right approach depends on the business, the ownership structure, and the individuals involved. What matters most is getting advice early enough to give yourself options.
CGT increases and double tax
There’s more. Capital Gains Tax (CGT) has increased sharply for business owners. The rate for business asset disposal is now 24%, up from the 10% that once applied under Entrepreneurs’ Relief. This means owners could face CGT when selling or restructuring a business — and then IHT later, if some value remains. That’s two separate taxes on the same wealth.
For non-doms, options are shrinking
The Budget also confirmed reforms to non-domicile status. These make it harder to remain outside the UK IHT regime. But people with significant wealth often have options. If these changes encourage even a small number to move abroad, it’s not clear the policy will raise more tax.
Will it raise revenue?
According to HM Treasury, the reforms to Agricultural Property Relief, Business Property Relief, and AIM-listed investments are forecast to raise £1.77 billion over five years (source: Autumn Budget 2024 – Table 5.1, line 29).
Conclusion
Rachel Reeves clearly believes it will raise money — that’s why it’s in the budget. But the total is relatively modest, particularly given how hideous the legislation is — an average of £350 million per year. If this forces businesses to lay off staff, wind up, reduce profits (and therefore corporation tax), or sell out to non-UK owners, then we have to ask — is it worth it?
It’s not too late to plan. These rules don’t apply until 2026, and in many cases there are smart, legitimate steps that can be taken in the meantime.
Good planning, done early, could save families from having to find hundreds of thousands of pounds — and help keep control of the businesses and legacies they’ve spent lifetimes building.
