Introduction to the IHT rule changes
Business owners are facing a cap on relief from inheritance tax (IHT), impacting the extent to which a trading business can be passed on free of tax and creating a succession planning headache for many.
The Office for Budget Responsibility has estimated that only 1,570 estates will be impacted each year by the introduction of a cap on 100% relief, equating to £200m extra tax revenue in 2026/27.
However, we know from our conversations with clients and other professional advisers that the impending rule change is a real and pressing concern for farm and business owners up and down the country.
Here we examine key aspects of the new rules and what business owners need to be thinking about now.
When will the rules change?
- The new rules are set to take effect from 6 April 2026.
- Transitional arrangements will apply to gifts made in the period between 30 October 2024 and 6 April 2026, and to certain ‘pre-commencement’ trusts in existence prior to 30 October 2024.
- Lifetime gifts made before 30 October 2024 will not be affected, or brought into account, in relation to the new cap.
Who will be affected?
- Individuals whose death occurs on or after 6 April 2026 and whose estate for inheritance tax purposes includes assets eligible for 100% relief (qualifying assets).
- Settlors and trustees of trusts holding qualifying assets.