More detail on business and agricultural IHT reliefs threshold cut

HMRC’s recently closed consultation offers further clarity on how the £1 million inheritance tax (IHT) business and agricultural relief allowance will work from 6 April 2026.
The total value of business and agricultural property eligible for 100% IHT relief will be limited to £1 million. Any qualifying assets above this limit will receive relief at a reduced rate of 50%.

For an entrepreneur with a business valued at, for example, £5 million, the new relief threshold could result in an additional IHT liability of £800,000.

The relief
The £1 million allowance will be used up by any lifetime transfers of business and agricultural property made within seven years of death. So:

• The allowance will be renewed every seven years on a rolling basis in a similar way to the nil rate band of £325,000.
• Business and agricultural property that only qualifies for 50% relief, such as Alternative Investment Market shares, will not use up the £1 million allowance.

 
Although spouses and civil partners will each qualify for their own £1 million allowance, any unused allowance will not be transferable in the same way as the nil rate band.
 
Planning
 
Currently, with unrestricted 100% business and agricultural relief, IHT planning primarily concerns ensuring relief is available.
 

• In future, there will be more incentives to make lifetime gifts where the £1 million allowance is insufficient to cover the value of business and agricultural property. This, of course, has implications for capital gains tax that must be considered.
• It may be worthwhile to put a fairly substantial gift into trust. For example, the lifetime IHT payable on a £2 million gift of agricultural property into trust would be £35,000

 
If making a lifetime transfer of business or agricultural property to a spouse or civil partner, you must be aware that the property should be held for two years before relief will be available.
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Annex A of HMRC’s consultation has six case studies which illustrate how the £1 million allowance will be applied. The consultation can be found here.