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Business & inheritance tax — 21 August 2026, updated 16 October 2026 — by Laurence Gould
For a generation, owners of trading businesses and farms could plan around a simple truth: qualifying business assets passed on death with 100% relief from inheritance tax, whatever their value. Since 6 April 2026, that is no longer the rule — and wills written under the old assumption can now produce tax bills their owners never saw coming.
Business relief and agricultural relief still exist, and 100% relief still applies — but now only to the first £2.5 million of combined qualifying business and agricultural property per person. (The government first announced £1 million and raised it to £2.5 million in December 2025.) Above that line, relief drops to 50%, which with inheritance tax at 40% means up to 20% tax on the excess, before other exemptions and allowances. Qualifying shares quoted on markets such as AIM now get 50% relief, with no £2.5 million band at all — and an AIM listing alone doesn't guarantee they qualify.
A trading company worth £4 million, owned by one person, that would previously have passed free of inheritance tax can now generate a charge of around £300,000 — 20% of the £1.5 million above the allowance, assuming the whole company qualifies, no allowance is transferred from a spouse, and the nil-rate bands are already used elsewhere. That is the scale of the shift — and a successful company plus its premises, or a family farm at today's land values, can cross £2.5 million sooner than owners assume.
Nothing has gone wrong with older wills as documents — they remain valid. What's changed is the assumption they were built on. The new limit changes the sums, so it may be worth revisiting choices made when the business passed tax-free: which death uses the relief, whether shares should pass directly to the next generation or into a trust on the first death, or how the estate would fund a tax bill without selling the business itself. For larger businesses, those questions can now have six-figure answers. Instalment options exist for paying inheritance tax on business property — interest-free in qualifying cases — but instalments are a way of paying a bill, not a way of avoiding an unnecessary one.
Whether the business still qualifies at all — relief needs a genuinely trading concern, and large cash reserves or investment activities can dilute it. How close the combined business and agricultural value sits to £2.5 million per owner, and how the wills make use of both owners' allowances, including the part that can now pass to a surviving spouse. Whether a trust on the first death now earns its keep. Whether your company's articles or partnership agreement would even let the shares go where the will sends them. And where a tax bill is now unavoidable, whether life cover written in trust should fund it — which is regulated advice, arranged through our sister firm at the same address, so the whole answer joins up.
The wider mechanics of wills, cross-option agreements and business LPAs are on our business estate planning page.
If you own a trading business or farmland and your will predates 2026, it was written for a tax regime that no longer exists. It deserves an hour's re-reading before events re-read it for you.
Free consultation, online or at your place of business. If your plan still holds, we'll tell you exactly that.