How much inheritance tax will my estate pay?
IHT is charged at 40% on the value of your estate above the nil-rate band. A residence nil-rate band may be available in addition where a main home passes to direct descendants, though it tapers away for larger estates.
Unused allowances can generally be transferred to a surviving spouse, so a married couple can often pass on substantially more than an individual. Transfers between spouses are themselves normally exempt.
What is changing for business owners from April 2026?
This is the most significant change to inheritance tax for trading businesses in decades.
Historically, Business Relief could take a qualifying trading business out of inheritance tax entirely, and Agricultural Relief did the same for farmland. Reforms taking effect from April 2026 restrict full relief, so that from 6 April 2026, 100% relief applies to the first £2.5 million of combined business and agricultural property per person (transferable between spouses and civil partners), with 50% relief above that — an effective rate of 20%.
The practical consequence is that an estate which would previously have passed a company or a farm to the next generation free of IHT may now face a real liability — one that has to be funded, potentially by selling part of the very business it was meant to preserve. Owners of trading companies and farms should review their position now.
How can I reduce inheritance tax?
Lifetime gifting — outright gifts generally fall out of your estate after seven years, with taper relief in between. There are also annual and small-gift exemptions, and an exemption for regular gifts made out of surplus income.
Trusts — can remove value from your estate while retaining a degree of control, though they carry their own tax charges and must be structured carefully.
Your will — how assets pass, and to whom, directly determines whether the residence nil-rate band and spousal exemptions apply.
Business structure — for owners, whether assets qualify for relief depends on how the business is held and what it does. This is now the single highest-value review a business owner can undertake.
Life cover in trust — does not reduce the tax, but funds it, so the family is not forced to sell.
When should I start estate planning?
Earlier than you think. The seven-year rule means gifts need time to work. Trusts take time to establish. Business restructuring takes time — and, done in a hurry in anticipation of death, may be challenged.
If you own a trading business or farmland, the April 2026 changes make this immediate rather than eventual.
We advise on the tax; we work alongside your solicitor on the law
Inheritance tax planning sits at the intersection of tax and law. We handle the tax analysis, valuations and business structure, and work with your solicitor on wills and trust deeds. LMJ Group does not provide regulated investment or protection advice.
