2026 Inheritance Tax changes: at a glance
- What do I need to know? The government has announced UK Inheritance Tax changes that will take effect on 06 April 2026, including new caps on tax relief for businesses and farms, and an extension to the freeze on nil-rate band thresholds.
- What does it mean for me? Business owners and some landowners are likely to face higher IHT, while frozen tax-free thresholds could mean more families paying IHT. This is despite an expansion of relief announced in December 2025 for measures due to come into effect in April 2026.
- Why does it matter? Understanding Inheritance Tax changes and how they impact your wealth is essential for estate planning and gifting, making sure you protect your family’s finances in the long term.
The Autumn 2025 budget revealed the changes to Inheritance Tax (IHT) that will come into effect in 2026.
In this guide, you’ll learn about the upcoming UK Inheritance Tax changes, how they could impact your generational wealth goals, and the strategic steps you can take to minimise the impact on your finances.
What are the UK Inheritance Tax changes coming in 2026?
From 2026, changes to Inheritance Tax will impact how much you can pass on tax-free. The changes specifically target the agricultural sector and some business properties. If you’re unsure whether the changes apply to you, consider speaking to a financial adviser.
The changes include a freeze on current Inheritance Tax thresholds and a limit on the relief available for business and agricultural assets when succession planning.
Frozen Inheritance Tax thresholds changes
Inheritance Tax thresholds, which were previously frozen until the 2029/30 tax year, have now been extended a further year.
The following thresholds will now remain frozen until 06 April 2031:
• The nil-rate band (NRB) of £325,000
• The residence nil-rate band (RNRB) of £175,000
• The £2m RNRB taper threshold
These thresholds allow you to pass on £325,000 tax-free, or up to £500,000 if you leave your main residence to your children or grandchildren.
But, where an estate exceeds £2m, the RNRB is gradually withdrawn. For every £2 your estate is valued over the £2m threshold, £1 is deducted from your RNRB allowance.
While this extended freeze provides some certainty that allowances won’t decrease in the short term, it also means more families could face IHT through inflation and property price increases.
Can I leave my property to my children without paying Inheritance Tax?
If you pass on your home to your children or grandchildren and live for seven years after making the gift, HMRC won’t charge any Inheritance Tax on the property. But this only applies if you don’t continue to benefit from the home, such as living in it rent-free.
If you keep the property until you pass away, your IHT bill will depend on the total value of the estate. If the value of your estate is within your available tax-free thresholds, you won’t pay any Inheritance Tax.
For most people, this means you can pass on a property worth up to £500,000 using both the NRB and the RNRB, provided you’re leaving your home to your direct descendants. For surviving married couples or civil partners, unused allowances can be combined, meaning up to £1m could be passed on without an IHT charge in some circumstances.
If the total value of your estate exceeds your permitted thresholds, HMRC charges IHT at 40% on the amount above the limit.
If your property is valued above £2m, your RNRB allowance tapers downwards. For every £2 above the £2m your property receives in a valuation, your RNRB reduces by £1. This means that if your property is valued at £2,350,000 or more, you receive no RNRB, increasing the amount of IHT due.
You can use an Inheritance Tax calculator to work out how much IHT you’ll pay.
Inheritance Tax relief for agricultural and business properties
In 2024, the government announced plans to reform Agricultural Property Relief (APR) and Business Property Relief (BPR). From 06 April 2026, HMRC will introduce a limit on the value of assets that are eligible for 100% relief from IHT.
Eligible agricultural or business assets, such as shares, land, buildings, and machinery, will qualify for 100% relief from Inheritance Tax up to £2.5m per person. Over this amount, HMRC will only offer 50% relief. This means only half of the excess value is subject to IHT.
Unused allowances can be transferred to a surviving spouse or civil partner. This means that by combining the unused allowances with both nil-rate bands, two individuals could pass on a farm worth up to £5.65m tax-free. The £2.5m cap will also extend to qualifying property in trusts after 06 April 2026.
Inheritance Tax due on APR and BPR assets can be paid in interest-free instalments over 10 years, helping to ease cash-flow pressures for families and businesses.
These changes aim to protect smaller farms and family-run businesses, while limiting the scale of tax relief available to the largest estates.
When will these changes come into effect?
The new cap on BPR and APR will come into effect from 06 April 2026.
The existing NRB and RNRB tax-free thresholds are already in place and will remain frozen at their current levels until at least April 2031.
HMRC Inheritance Tax changes for 2027 were also announced in the Autumn 2025 Budget, such as the upcoming Inheritance Tax changes to pension funds, which are due to take effect from 06 April 2027.
If you start strategic tax planning for retirement early, you can often minimise IHT payments and protect your estate for your loved ones.
How can I legally minimise the impact of Inheritance Tax changes?
With both new and existing Inheritance Tax rules to consider, proactive financial planning can help you protect your cash and build tax-free savings for your family.
The following methods can help you support future generations and reduce the value of your taxable estate:
- Start lifetime gifting: The seven-year Inheritance Tax rule can drastically reduce the taxable value of your estate. If you’re eligible for APR or BPR, lifetime gifting of business or agricultural assets can help to keep your assets below the £2.5m cap.
- Maximise exempt allowances: Various gifting allowances are exempt from Inheritance Tax. These include gifts to spouses or civil partners, the £3,000 annual gift allowance, and the £250 small gift allowance for any number of people.
- Check assets qualify for APR or BPR: For landowners and business owners, greater IHT relief is subject to certain criteria, including a minimum ownership period of at least two years before passing away. Reviewing your assets to guarantee they are eligible can help to reduce your IHT bill.
- Open Junior ISAs (Individual Savings Account): A Junior ISA allows you to save up to £9,000 annually tax-free for your child. When the child turns 18, they get access to these savings.
- Fund Junior SIPPs (self-invested personal pension): You can save into a pension on behalf of your child with a Junior SIPP, which acts in the same way as an adult SIPP, with the same tax rules. The child will become the owner of the pension at age 18, but they usually won’t be able to withdraw from a SIPP until they turn 55 years old (rising to 57 from 06 April 2028).
You can usually minimise Inheritance Tax using some or a combination of the approaches above. But your loved ones may need to pay other taxes such as Capital Gains Tax or Income Tax depending on how you gift the assets and what they choose to do with them once you pass away.
Junior ISAs and SIPPs are treated as gifts for IHT purposes and will usually fall within your annual gifting allowances, unless they are considered normal expenditure out of income.
Plan ahead to protect your estate
2026 brings Inheritance Tax changes that will affect individuals, families, landowners, and business owners. Understanding the upcoming changes can help you calculate your Inheritance Tax bill and plan your succession more effectively.
You can minimise the amount of IHT payable by growing your family’s savings early, making use of the seven-year IHT rule and exempt allowances.
Calculate IHT for your family with Flagstone
Take care of your family and younger generations by learning how much IHT you owe using our Inheritance Tax calculator.
Discover how much of your current estate is taxable and confidently update your savings strategy to gift more to your loved ones when you pass away.
