The goalposts concerning inheritance tax reliefs \u2014 who gets them and how much they are worth \u2014 seem to be continually moving.<\/p>\n
From April 2026 farmers and family firms will be the first hit by changes to the so-called death tax. Many farms and private companies benefit from two reliefs, agricultural property relief and business relief, but both are being cut.<\/p>\n
The government expects the changes to bring in about \u00a3500 million a year from the 2027-28 tax year. Here\u2019s how the system works, how it will change and whether you will be affected. <\/p>\n
Inheritance tax is charged at a rate of 40 per cent on the value of your estate above \u00a3325,000, but this tax-free allowance rises to \u00a3500,000 if you pass your home to a direct descendant (a child or grandchild) as long as your estate is not worth more than \u00a32 million.<\/p>\n
Anything you leave to a spouse or civil partner is exempt from inheritance tax. They can also inherit your unused allowances so, in theory, couples can leave \u00a31 million to their children tax-free.<\/p>\n
\u2022 Visit the new and improved Times Money<\/a> for the latest personal finance news, guides and expert columnists <\/p>\n What is business relief?<\/p>\n Business relief, previously known as business property relief, was introduced in the 1970s to ensure that family-owned businesses did not have to be broken up or sold to pay an inheritance tax bill if someone died.<\/p>\n As it stands, you get business relief if you hold qualifying assets for at least two years and are still holding them when you die. <\/p>\n If you are a sole trader or partner in a business, then you get 100 per cent relief, so you can pass on the asset tax-free. If you have a controlling share in a listed company or you are passing on land, buildings or machinery used for the purposes of the business, then there is 50 per cent relief, so your beneficiaries will pay 20 per cent tax rather than 40 per cent.<\/p>\n \u2022 Everything you need to know about the seven-year inheritance tax rule<\/a><\/p>\n Business relief also applies to some shares that you may hold as an investment. <\/p>\n The rules are complex. The company must be engaged in continuing trade and not make most of its income \u201cpassively\u201d, for example from investments or property sales. Some oil and mining companies do not qualify because some of their revenue comes from the sale of property assets.<\/p>\n What is agricultural property relief?<\/p>\n Agricultural property relief predominantly applies to farmers. As a general rule of thumb, any land or pasture that is used to grow crops or to rear animals can be passed on tax-free. Derelict buildings, farm equipment and machinery and livestock are not included (but farms may be able to use business relief on these assets instead).<\/p>\n Farmers get 100 per cent relief if they have either occupied and actively farmed the land for a minimum of two years, or owned the land for at least seven years if it has been farmed by another person. Most other farmers get 50 per cent relief.<\/p>\n You cannot claim business relief on an asset that you have already claimed agricultural relief on.<\/p>\n How is business and agricultural property relief changing?<\/p>\n From April 2026, the 100 per cent relief will be capped at \u00a31 million for combined agricultural and business property. <\/p>\n This means that anyone inheriting a family business or farm will be able to inherit only \u00a31 million of it tax-free \u2014 the rest will qualify for 50 per cent relief, giving an effective tax rate of 20 per cent instead of 40 per cent on assets above the limit. As with all assets, anything passed between spouses is tax-free. <\/p>\n