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Business & inheritance tax — 21 August 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 £1 million of combined qualifying business and agricultural property per person. Above that line, relief drops to 50%, which with inheritance tax at 40% produces an effective 20% charge on the excess. Shares quoted on markets such as AIM now attract 50% relief throughout, with no £1 million band at all.
A trading company worth £3 million that would previously have passed free of inheritance tax can now generate a charge of around £400,000. That is the scale of the shift — and a modest company plus its premises, or an average family farm, crosses £1 million far sooner than most owners assume.
Nothing has gone wrong with older wills as documents — they remain valid. What's changed is the assumption they were built on. A will drafted when the business passed tax-free had no reason to think about 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. Those questions 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 £1 million per owner, and whether the wills use both allowances rather than accidentally stacking everything on the second death. 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.