April 2026 marks the most significant overhaul of the UK's inheritance tax regime in decades, fundamentally changing how business assets, agricultural property and pension wealth are taxed on death.

‍

The End of Unlimited Business and Agricultural Relief

From 6 April 2026, 100% IHT relief on qualifying Business Property Relief (BPR) and Agricultural Property Relief (APR) assets is capped at £2.5 million per individual. Assets above that threshold attract only 50% relief, creating an effective 20% IHT charge on the excess. Couples can combine allowances up to £5 million with appropriate planning. AIM-listed shares, previously qualifying for 100% BPR relief, now receive only 50% relief from the first pound of value - catching a significant number of existing portfolios that have never been reviewed.

‍

Pensions: The Next Frontier

From 6 April 2027, most unused pension funds will be brought within the scope of IHT for the first time. Previously outside the estate entirely, unused pension funds will now be aggregated with the rest of the estate and taxed at 40% where allowances are exceeded. Where the deceased died after age 75, beneficiaries may also face income tax on drawdown, creating a potential combined effective rate of up to 64–67%. The 2026/27 tax year is the last full year before this change takes effect.

‍

Frozen Thresholds and Widening Exposure

The nil-rate band remains fixed at £325,000, with the residence nil-rate band at £175,000, both frozen until April 2030. As asset values grow, more estates are pulled into the IHT net each year. Combined with capped business relief and the incoming pension changes, existing succession plans are unlikely to remain efficient without review.

‍

Trusts, Gifting and Liquidity

Relevant property trusts will have their own £2.5 million relief allowance, refreshing every ten years. Lifetime gifts of BPR and APR assets made on or after 30 October 2024 may reduce the relief available on death, adding complexity for those with recent gifting programmes. To ease liquidity pressures, IHT on qualifying assets can now be paid in up to ten annual interest-free instalments.

‍

The International Dimension

The 2026 reforms sit alongside the abolition of the non-dom regime in April 2025, creating a significantly more demanding UK tax environment. Long-term UK residents who have left the UK can remain subject to IHT on worldwide assets for up to ten years after departure. A transitional window allows offshore funds to be remitted at a reduced 12% rate during 2025/26 and 2026/27 - a time-sensitive opportunity that closes entirely in April 2028.

‍

Summary

The UK's inheritance tax landscape has changed fundamentally. For business owners, farming families, high-net-worth individuals and internationally mobile clients, reviewing existing structures is no longer optional - it is urgent.

‍

About Affinity

Affinity works with international private clients, entrepreneurs and family offices across wealth structuring, fiduciary services, trust administration and cross-border planning. With expertise spanning the Isle of Man, Malta, Cyprus, the Cayman Islands, the UK and the United States, Affinity supports clients navigating complex and evolving tax environments with bespoke international structures designed to preserve, protect and optimise long-term wealth across generations.

Learn more about our services in the UK.

Contact our team to arrange a meeting.