Inheritance Tax – Farms and Business Assets from April 2026

Inheritance Tax – Farms and Business Assets, from 6^th April 2026 it shall no longer be possible to enjoy an unlimited value of agricultural and/or business-related assets Inheritance Tax (IHT) relief after our lifetimes when we pass these down to the next generation. However, these will continue to be exempt from IHT when passing them to our surviving spouse.

Thereafter, any value of agricultural and/or business-related assets valued at greater than £1 million shall pay an effective IHT rate of 20% when passing to a non-spouse, BUT SOLELY UPON THE ASSET VALUE IN EXCESS OF £1 MILLION.

However, what most of the mainstream media have failed to clarify is that the above is in ADDITION TO the personal IHT free allowances which may also apply.

For example:

A married couple running a farm or business valued at £2 million, having no other assets of value, and they each wish to pass the benefit of their respective shares of that farm or business to the survivor of them after the first death, then to at least one of their children after the second death.

There would be no IHT liability after the first death because we can pass any value of our assets to our surviving spouse free of IHT, and that will not change from April 2026. Thereafter, when the second spouse dies, they shall have the following IHT free allowances available to them:

£325,000 personal allowance available to the second deceased’s estate; and

£175,000 residential allowance available to the second deceased’s estate.

Because the first deceased passed their entire estate value directly to their surviving spouse and did not need to use their available IHT allowances as a result, then these are now available to the estate of the second deceased. This provides a further £500,000 of unused (by the first deceased’s estate) IHT free allowances upon the second death.

The Total value of available personal IHT free allowances after the second death is £1 million.

In addition, a further £1 million of agricultural or business assets IHT relief is also available to the estate of the second deceased.

This means that upon the second death, as the total of IHT free allowances is £2 million, and the value of the farm or business is also £2 million, then there would be NO INHERITANCE TAX upon the transfer of the farm or business to the child or children of both deceased parents.

Furthermore, if the farm or business was valued at £3 million. The first deceased spouse could pass up to £1 million worth of that farm or business, free of IHT, to one or more of their children (rather than their spouse) immediately after their death via their Will. This would mean that the surviving spouse could pass a further £1 million worth of that farm or business, free of IHT, to one or more of their children after their subsequent death, PLUS use their additional personal IHT free allowances of £1 million. Therefore, £3 million of total combined asset value of both parents of the child or children would pass free of IHT.

For further details, WITHOUT consultation fees nor obligation, please visit TRF Wills