Important Update for Farmers & Business Owners: Time to Double‑Check Those Wills!
In plain terms: Starting April 2026, the generous 100 % inheritance‑tax relief that covered the first £1 million of qualifying business or agricultural assets will no longer be transferable. The old trick of passing it to a spouse or a child to dodge a tax hit is gone.
The New Rules in a Nutshell
- First £1 m stays tax‑free for both agricultural and business property combined.
- Amounts over £1 m get a 50 % relief.
- Each person gets one £1 m allowance.
- The spouse exemption remains unchanged, so qualifying assets can still go to a UK, long‑term resident spouse free from IHT during life or at death.
What the Draft Didn’t Deliver
Many were hoping the legislation would mirror the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) – where unused allowances can shuffle to the surviving spouse’s estate. That’s still a nope.
So, if a business owner leaves assets to a spouse, nothing bad happens – the spousal transfer rules keep IHT out. But when that spouse later bequeaths assets to children, they’ll only get the £1 m allowance instead of the £2 m that would have been possible under the old system.
Why This Matters: A Word from a Tax Partner
BDO’s tax partner, Elsa Littlewood, summed it up: “The draft confirms no transfer of the £1 m allowance. This adds more complexity to an already tangled inheritance‑tax maze and may penalise the unsuspecting.”
- Before, passing a business or farm to the next generation was fairly straightforward.
- Now, the process is tougher and more tax‑charged.
Practical Tips for Business Owners & Farmers
- Lifetime transfer to spouse – move assets while alive; once the two‑year ownership period hits, each spouse can hold up to £1 m of qualifying assets.
- Trusts – set up a trust with a life‑interest for the surviving spouse, ensuring clear ultimate beneficiaries.
- Check your will – make sure it reflects these changes before the deadline.
- Silver lining – from April 2030 onwards, the £1 m allowance will be adjusted for inflation, giving a bit of future relief.
Take Action Now
If you’re a farmer or business owner, it’s time to sit down, review your will, and plan for the new tax landscape. Don’t let a missed allowance turn into a tax hit for your loved ones.
