How Reviewing Your Will Can Help Reduce Inheritance Tax from April 2026

One of the most significant changes is to the way Inheritance Tax is to be paid on business interests and farming assets.

While there has been much widespread media attention on the changes to Agricultural Property Relief, the changes to Business Relief (formerly Business Property Relief) were largely unreported.

We covered upcoming changes to BPR in depth recently, as well as your options around lifetime gifting in the context of the April 2026 IHT changes. This focus of this article will be on how your Will can be updated in preparation for rule changes so that you aren’t caught out and stay in control of your estate planning.

How does Business Relief work?

Business Relief is typically available on:

• Shares in an unquoted company
• Shares in a qualifying company listed on the Alternative Investment Market (AIM)
• An unincorporated qualifying trading business, or an interest in one, such as a partnership

The qualifying criteria are that a person must have held the interest for two or more years, and the business must be trading in nature.

Subject to the above, the relief from Inheritance Tax is currently 100% meaning that no Inheritance Tax is payable on an interest in a trading business regardless of value.

This is a vital relief and enables family run businesses to pass from one generation to another unburdened by Inheritance Tax.

A further 50% Business Relief is available on:

• A controlling holding of shares in a quoted company.
• Land, buildings, machinery or plant used wholly or mainly for the purpose of the business carried on by a company or partnership.

What will happen to Business Relief in April 2026 changes

For any deaths on or after 6^th April 2026 this relief will be capped at £1million per person.

Any qualifying business assets above that threshold will be subject to Inheritance Tax at a reduced rate of 20%, rather than the standard 40%.

In addition, shares in a qualifying company listed on the AIM market will not be eligible for the £1million allowance and will be subject to Inheritance Tax at 20% on the whole value.

This is going to have a significant impact on businesses, particularly family-run businesses where the intention is to pass the business to the next generation and for it not to be sold on death.

November 2025 budget: a key clarification for spouses

Thankfully, the Chancellor has confirmed the £1million allowance will be transferable between spouses, having said in 2024 that it wouldn’t. This is a relief to many family businesses.

However, it’s still advisable for family business owners to capture the relief available on first death. This will means if the business is subsequently sold, the net proceeds of sale will be ring-fenced, for Inheritance Tax purposes, within the trust.

Why you should review your Will before April 2026

Leaving business assets outright to a surviving spouse may appear straightforward, as it benefits from spouse exemption and avoids inheritance tax on first death. However, this approach can have unintended consequences if the business is later sold or increases in value.

By contrast, a well-drafted will can include a trust of business interests on first death, allowing:

• The surviving spouse to benefit from income or value
• The capital value of the business (or sale proceeds) to be ring-fenced for inheritance tax purposes
• Reliefs to be preserved even if the business is sold after the first death

Crucially, assets placed into such a trust do not aggregate with the survivor’s estate for inheritance tax purposes.

Example case: what could happen post April 2026

• Mr and Mrs Jones own an electrical company. The company as a whole is worth £2 million.
• In addition to the company, they have a house worth £500,000 and savings and investments of £300,000. They have two children and will leave the house to the children when the second of them dies.

Without trust planning in the Will

• If Mr Jones dies and leaves his entire estate to Mrs Jones, there will be no Inheritance Tax payable due to spouse exemption. However, Mrs Jones will then own the entire estate worth £2.8million.
• Mrs Jones then sells the business as she cannot run it without her husband.
• Upon Mrs Jones’ death, the nil rate band allowance x 2 (transferred from Mr Jones) of £650,000 can be deducted.
• The residence nil rate band is not available as her estate exceeds £2.7million.

The Inheritance Tax calculation post April 2026 would be calculated as:

• £2,800,000 less £650,000 = £2,150,000
• £2,150,000 x 40% Inheritance Tax rate = £860,000 of Inheritance Tax payable

With trust planning in the will

• On Mr Jones’ death, his shares pass into the trust from which Mrs Jones can benefit but which does not aggregate with her estate for Inheritance Tax purposes.
• The remainder of the estate passes to Mrs Jones and is therefore covered by spouse exemption, so no Inheritance Tax is payable on Mr Jones’s death.
• When the business is sold, Mrs Jones has £1million of the sale proceeds but the sale proceeds of the shares belonging to Mr Jones now pass into the trust which does not form part of her estate for Inheritance Tax purposes.
• As her estate is now below £2million, the full residence nil rate band is available to her estate which means that her allowances are now 2 x the nil rate band allowance (£650,000) and 2 x the residence nil rate band allowance (£350,000).

The Inheritance Tax calculation post April 2026 would be calculated as:

• £1,800,000 less £650,000 less £350,000 = £800,000 x 40% = £320,000 of Inheritance Tax payable.

By careful planning, this provides a tax saving of £540,000.

Why Professional Advice Is Essential

The inheritance tax changes taking effect from April 2026 mean that out-of-date wills could result in substantial and unnecessary tax liabilities, particularly for business owners and farming families.

Reviewing a will now allows:

• Business Relief to be captured effectively
• Trusts to be structured correctly
• Flexibility to be built in should circumstances change

Seeking specialist advice ensures that a will is drafted to maximise available reliefs and protect family wealth for future generations.

Get in touch today via our form to speak with an expert in our Wills, Trusts and Probate team.