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:
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.
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. 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. Comments are closed.
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