Inheritance tax after 2026: pensions, business relief and the family home
Business and agricultural relief now have a £2.5 million limit, and unused pensions come into estates from April 2027. What has changed, and what still works.
Inheritance tax is charged at 40% on the part of an estate above the tax-free threshold. Everything left to a spouse or civil partner is exempt, and unused thresholds pass to the survivor, so for many couples the real question is what happens on the second death.
Business and agricultural relief
For deaths on or after 6 April 2026, qualifying business and agricultural property gets 100% relief on up to £2.5 million, and 50% relief above that. Unused allowance can pass to a surviving spouse or civil partner, making up to £5 million for a couple. Shares on markets such as AIM only get 50% relief and do not use the allowance.
Before any nil-rate band, and assuming the rest of the estate uses it. Paying over ten years in instalments is often possible on business assets.
Show the data
| Relief at 100% (no tax) | £2,500,000 |
|---|---|
| Relief at 50% (half taxable) | £1,500,000 |
| Tax at 40% on £750,000 | £300,000 |
Pensions join the estate
For deaths on or after 6 April 2027, most unused pension funds and death benefits will be counted in the estate, with personal representatives responsible for reporting and paying any tax. Death in service benefits stay outside. For people who were saving their pension to pass on, the order in which they spend their assets may change.
What still works
- Gifts of up to £3,000 a year, small gifts of £250 per person, and gifts on marriage.
- Regular gifts out of surplus income, recorded as you go.
- Larger gifts, which fall outside the estate after seven years.
- A will that uses both nil-rate bands and the residence nil-rate band.
Sources
More on
This insight is general information, not advice for your circumstances. Talk to us before acting on it.