Category: Inheritance Tax

How Rising Inheritance Tax Impact Families and What You Can Do

Posted on by Nida Umair

Inheritance Tax (IHT) receipts in the UK have surged, reaching £6.6 billion in the first nine months of the 2025/26 tax year. This is an important development, with more families affected by rising asset prices and frozen tax thresholds. As these trends continue, rising inheritance tax collections are expected to exceed last year’s record of £8.2 billion, with projections indicating IHT receipts could reach £9.1 billion by the end of the current fiscal year.

Why Is Inheritance Tax on the Rise?

Several factors are contributing to this sharp rise in IHT receipts:

  • Frozen Tax Thresholds: While asset values continue to increase, the IHT thresholds have remained unchanged. As a result, more estates are crossing the threshold and becoming liable for tax.
  • Soaring Asset Values: Property prices and investments have hit record highs, meaning that estates with significant wealth are increasingly subject to IHT.
  • Pensions Will Be Included in IHT from 2027: Starting in April 2027, pensions will be included in IHT calculations, further expanding the number of families affected by this tax.

The government’s Office for Budget Responsibility (OBR) predicts IHT receipts will continue to rise, surpassing £14 billion by 2029/30. The ongoing freeze in tax thresholds and the upward pressure from rising asset prices make this increase inevitable.

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What Changes Are Coming to Inheritance Tax?

The IHT landscape is already undergoing changes, and we anticipate more in the upcoming years:

  • Pensions in IHT Calculations: From 2027, pensions will be included in an individual’s estate for IHT purposes. This could significantly increase IHT liabilities, especially for those with large pension pots.
  • Cap on Reliefs: The government has introduced caps on agricultural and business property reliefs, which could impact business owners and farmers. However, an increase in the 100% agricultural relief threshold to £2.5 million (up from £1 million) starting in 2026 may offer some relief.
  • Mansion Tax: The introduction of the mansion tax in April 2028 may slow the pace of IHT receipts growth, as it could lead to behavioural shifts in the housing market.

How Can You Reduce Your Inheritance Tax Bill?

There are several strategies you can use to minimise your IHT liability:

  • Leave Assets to a Spouse or Charity: Assets inherited by a spouse or civil partner are exempt from IHT, and charitable donations can reduce your liability.
  • Use the Seven-Year Rule: Gifts made more than seven years before your death are generally exempt from IHT. This allows you to reduce the value of your estate while you are still alive.
  • Business Property Relief (BPR): Investments in unlisted companies can qualify for BPR and be exempt from IHT after two years. From 2026, this relief will be capped at £1 million.
  • Alternative Investment Market ISAs: These are currently exempt from IHT, though they will be subject to a 20% tax from 2026.

Strategic Estate Planning Is Key

In light of these changes, individuals should regularly review their estate plans to ensure they are maximising the available reliefs. The introduction of new rules, especially around pensions, means now is the time to reassess your strategy.

Here are a few steps you can take to ensure efficient estate management:

  • Get an Up-to-Date Estate Valuation: Understanding the value of your assets, including property, investments, and pensions, is crucial in assessing your IHT liability.
  • Plan Early: As IHT policies evolve, it’s important to plan well in advance, especially with the upcoming changes to pension rules in 2027.
  • Avoid Panic Planning: Take the time to plan your estate carefully. Rushed gifts or withdrawals may lead to unexpected tax consequences.
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How We Help Deal With the Rising Inheritance Tax in UK

Apex Accountants offer expert advice on inheritance tax planning to help you navigate these complexities and reduce your inheritance tax bill. Our services include:

  • Estate Valuations: We help you assess the value of your estate and provide a clear picture of your potential IHT liability.
  • Tax-Efficient Estate Planning: We guide you through the process of gifting, charitable donations, and business reliefs to reduce your IHT exposure.
  • Pension and Asset Management: With upcoming changes to pension rules, we offer strategic advice to ensure your retirement funds are managed efficiently.
  • Ongoing Estate Reviews: We recommend regular reviews of your estate plan to adapt to changing laws and asset values.

If you’re concerned about your tax liability and the inheritance tax impact on your estate, don’t wait for the new rules to take effect. Contact Apex Accountants today to discuss how we can help you create a tax-efficient estate plan. Let us guide you in passing on your wealth to your loved ones with minimal tax impact.

By planning now, you can ensure that your assets are preserved for future generations, without unnecessary tax liabilities.

Urgent Transfers Triggered by Inheritance Tax Changes for Business Owners

Posted on by Muhammad Asif

Rising tax pressure is prompting business owners across the UK to act sooner than planned. From April 2026, inheritance tax changes for business owners will bring more company value within HMRC’s scope—leading many to review or accelerate succession plans.

A growing number of family business owners now say they intend to pass on their companies within five years. This shift is directly caused by the government’s decision to restrict Business Property Relief and apply inheritance tax to higher-value business assets. What was once a protected transfer is now a potential tax liability.

By removing full reliefs, the policy creates urgency—especially for mid-sized firms whose valuations tip over the new threshold. Owners are accelerating handovers to minimise exposure, even if their successors aren’t fully prepared. Proper inheritance tax planning for business owners is now more essential than ever.

At Apex Accountants, we guide business owners through these decisions with structured tax planning, business continuity advice, and succession strategies tailored to the new rules.

What Exactly Has Changed in UK Inheritance Tax Rules?

From 6 April 2026, inheritance tax applies more widely to business assets.

Key changes include:

  • Full relief applies only up to £2.5 million per individual for qualifying Business Property Relief (BPR) and Agricultural Property Relief (APR) assets.
  • Business value above that level receives only 50% relief, resulting in an effective 20% inheritance tax charge on the excess
  • Business Property Relief no longer shelters unlimited value, including AIM and unlisted shares, which now qualify only for 50% relief
  • Larger family firms and high‑value trading businesses face the greatest exposure

This has altered long-term estate planning. Many owners now act earlier to reduce future tax bills. These inheritance tax relief changesrequire business owners to act with greater care and speed.

Which Business Owners Feel the Most Pressure?

Mid-sized and large private businesses feel the greatest impact.

Patterns show that:

  • Mid- to large estates (with over £2.5m in qualifying assets) show the highest urgency to explore gifting, trust structures, or lifetime transfers before April 2026.
  • Estates below the £2.5m individual or £5m couple threshold remain largely unaffected, with around 85% of BPR/APR claimants falling outside the scope of the upcoming changes.
  • Turnover alone does not determine exposure; HMRC focuses on asset value when assessing inheritance tax, not business revenue.

The higher the valuation, the greater the inheritance tax risk. This explains the acceleration in ownership changes.

Why Are Some Owners Considering Leaving the UK?

Inheritance tax rarely acts alone. It adds to wider tax pressure.

Some owners worry about:

  • Rising personal tax exposure
  • Limited relief planning options
  • Uncertainty over future policy changes
  • Reduced incentives to retain UK residency

This has led some to explore relocation. However, exit decisions require careful tax analysis.

Why Rushing a Business Transfer Can Create Problems

Tax pressure should not dictate poor succession decisions.

Early transfers can lead to:

  • Leadership gaps
  • Unprepared successors
  • Loss of strategic direction
  • Reduced business value

A strong business often depends on founder knowledge. Removing that too early can weaken operations.

What Should Business Owners Do Before Making Any Transfers?

Planning must come before action.

Owners should review:

  • Business valuation under current rules
  • Successor readiness and governance
  • Capital gains tax exposure on lifetime transfers
  • Ongoing income needs after transfer
  • Control mechanisms post-transfer

A phased approach often works better than a full handover. Inheritance tax planning for business owners should always account for both financial and operational continuity.

How Apex Accountants Help with Inheritance Tax Changes for Business Owners

Choosing the right advisor matters when your business and family wealth are at risk. Apex Accountants supports business owners with clear inheritance tax and succession planning tailored to their long‑term goals. Our advice focuses on stability, timing, and control rather than rushed tax‑driven decisions.

Each plan begins with a detailed review of inheritance tax exposure under current and upcoming rules. We assess business valuations, ownership structures, and future income needs before recommending any transfer. This approach helps protect leadership continuity while reducing unnecessary tax risk.

Family‑run and owner‑managed businesses require careful planning. Apex Accountants delivers practical guidance that balances tax efficiency with business continuity. These inheritance tax relief changes need the support of skilled advisers who understand the risks to your business and your estate.

Contact Apex Accountants today to discuss a succession strategy that safeguards your business and your legacy.

Understanding the Latest UK Inheritance Tax Changes (2025/26) 

Posted on by Nida Umair

The UK’s inheritance tax (IHT) rules have changed significantly over the past year. Fiscal drag—the practice of freezing thresholds while asset values rise—means more families are being drawn into the IHT net. Recent budget have added new rules for pensions, business assets and even non‑UK residents. We believe it’s essential to understand UK inheritance tax changes and the questions they raise so you can plan confidently.

What is inheritance tax, and why does it matter?

Inheritance tax is a wealth transfer tax applied to estates over a certain threshold. The key points are:

Nil‑rate band (NRB)

The first £325,000 of an individual’s estate is exempt from IHT. This threshold has been frozen since 2009 and will remain fixed until at least April 2031. Anything above this amount is generally taxed at 40%. Unused portions of the NRB can be transferred to a spouse or civil partner at death, effectively doubling the combined allowance to £650,000.

Residence nil‑rate band (RNRB)

An additional allowance worth £175,000 applies when you leave a main residence to a direct descendant. The RNRB is reduced for estates worth over £2 million and can also be transferred to a spouse or civil partner. Together with the NRB, a couple can pass on up to £1 million tax‑free.

Main rate

Assets above the available allowances are taxed at 40%. IHT receipts reached £5.8 billion in the first eight months of the 2025/26 tax year, reflecting steady growth due to frozen thresholds and rising asset values.

Who pays?

The personal representative (executor or administrator) must settle the IHT bill from the estate before distributing assets. Selling assets to pay tax could lead to delays.

Only around 4.6% of deaths resulted in IHT being paid in 2022–23, yet IHT is a growing revenue source. The Office for Budget Responsibility expects annual IHT receipts to rise from £9 billion in 2025/26 to £14.5 billion by 2030/31.

Key Budget Changes and Upcoming Reforms

Recent budgets have introduced important reforms and changes to inheritance tax that will reshape estate planning starting in 2027 and continuing over the next few years.

1. Threshold freezes extended

The main nil‑rate band, the residence nil‑rate band, and the tapered threshold for the RNRB will remain frozen until the end of the 2030/31 tax year. The freeze increases the number of estates subject to IHT as property prices and investments grow.

2. Transferable £1 million allowance for farm and business assets

In the Autumn 2024 Budget, the government capped the 100% relief for agricultural property relief (APR) and business property relief (BPR) at £1 million per individual. This cap applies to qualifying farm or business assets and will now be transferable between spouses or civil partners from 6 April 2026. Couples can therefore pass on up to £2 million of qualifying assets at 100% relief. Any value above the cap is eligible for only 50% relief, leaving an effective 20% IHT charge. Taxes on this excess may be paid in instalments over ten years.

3. Unused pension pots become taxable

Until now, most defined contribution pensions have been outside the estate for IHT purposes. This will change from 6 April 2027:

  • Unused pension funds and death benefits will be included in a person’s estate for IHT. Personal representatives—not pension scheme administrators—will be responsible for reporting and paying the tax.
  • Death‑in‑service benefits and dependants’ pensions remain exempt.

This reform aims to prevent the primary use of pensions as a tax shelter and to align the treatment of discretionary and non-discretionary pension schemes.

4. Residence‑based rules for non‑UK domiciled individuals

From 6 April 2025, IHT will move from a domicile‑based to a residence‑based test for non‑UK The inclusion of pensions within IHT is a major change. Under current rules, most modern pensions fall outside your estate because trustees have discretion over distribution. However, starting in April 2027, the changes to inheritance tax will include the following:

domiciled individuals. A person will be treated as a long‑term resident (and therefore liable to IHT on worldwide assets) if they have been a UK resident for at least 10 of the previous 20 tax years. The concept of domicile and deemed domicile is abolished, and the new rules apply equally to UK‑born individuals who later emigrate. Transitional arrangements apply for those who leave the UK before the rule change.

How the New Inheritance Tax And Pension Rules Affect Your Estate

  • Most unused pension funds and death benefits will be included in your estate. Even if trustees retain discretion, the funds will generally be taxable unless specific exclusions apply.
  • Personal representatives (not pension providers) will be responsible for paying the tax.
  • Defined contribution pensions are most affected; defined benefit schemes usually provide a spouse’s pension rather than a lump sum.

If you plan to leave your pension untouched as an inheritance, you should reconsider. Beneficiaries may face both income tax and IHT on withdrawals after age 75. Early planning—drawing income sooner, purchasing life insurance, or gifting from other assets—helps reduce the eventual tax bill.

Planning Opportunities and Lesser‑Known Strategies

Proactive planning remains the best way to minimise IHT. In addition to standard techniques like writing a will and using the nil‑rate bands effectively, some lesser‑known options may help:

  • Deed of variation – Beneficiaries can, within two years of a death, redirect an inheritance to others or into a trust. This can reduce the estate’s IHT liability while still benefiting the family.
  • Business Property Relief (BPR) and AIM shares: Investments in qualifying unlisted companies or certain AIM shares can become exempt from IHT after two years. Note that starting in 2026, the IHT savings from AIM shares will be halved, so careful timing and risk assessment are essential.
  • Gifts out of surplus income: Regular gifts from income are immediately exempt if they do not reduce your standard of living. With pensions entering the estate, drawing pension income to fund gifts can be more tax‑efficient.
  • Life insurance held in trust: Policies can provide funds to cover IHT and avoid being part of your estate. Premiums may be covered by the surplus income exemption.
  • Trusts and family investment companies: These structures can allow assets to be moved outside your estate while retaining some control. Trust rules are complex, especially with new caps on APR/BPR for trusts created after October 2024, so professional advice is vital.
  • Lifetime gifting and utilisation of allowances: Gifting assets more than seven years before death removes them from your estate but may trigger capital gains tax. Under current rules, gifts of farm or business assets made before 6 April 2026 can still receive unlimited relief.

Planning strategies must be tailored to individual circumstances and kept under review as legislation evolves.

Non‑Dom Reforms – What You Should Know

The move to a residence‑based IHT regime is particularly significant for internationally mobile individuals. Key points include:

  • Long‑term resident test: Non‑UK assets fall within IHT if you have been UK resident in 10 of the previous 20 tax years. For those aged under 20, the test looks at whether the individual has been a UK resident for at least half of the years since birth.
  • No more deemed‑domicile concept: The concept of deemed domicile (15 of 20 years) is replaced; residence is the sole determinant.
  • ‘Tail’ period after leaving the UK: A long‑term resident remains liable for IHT on worldwide assets for up to three to ten years after becoming non‑resident, depending on how long they were a resident before. Once someone has been non‑resident for ten consecutive years, their worldwide assets become excluded property again.
  • Transitional rules: Individuals who left the UK before 6 April 2025 may remain under the old rules until they return.

In light of these reforms, international clients must review their residency, asset structures, and any existing trust arrangements.

How We Can Help You Deal With Latest UK Inheritance Tax Changes

Apex Accountants understand that inheritance tax can feel complex and personal. We provide comprehensive support to help families, business owners and international mobile individuals manage their IHT exposure. Our services include:

  • Estate and IHT planning: We help you structure your estate to make full use of NRB, RNRB and agricultural/business relief, prepare wills, and manage lifetime gifting.
  • Pension and retirement planning: We review your pension strategy in light of the 2027 reforms and advise on income drawdown and life insurance to mitigate tax.
  • Agricultural and business succession planning: We advise on using the new £1 million allowance effectively, transferring allowances between spouses, and funding any tax due—helping you pass on farms and businesses without breaking them up.
  • Trusts and family investment structures: Our team designs and implements trusts or family investment companies, considering new limits on APR/BPR and trust allowances.
  • Non‑dom and cross‑border advice: We guide internationally mobile clients on the new residence‑based rules, the 10‑year tail, and strategies to manage worldwide assets.
  • Reporting and compliance: Our team prepares and submits IHT400 forms, maintains communication with HMRC, and guarantees accurate calculation and timely payment of all taxes.
  • Valuation and funding solutions: We work with specialist valuers and insurers to determine the value of your assets and arrange life cover or financing where needed.

Conclusion

Inheritance tax is increasingly important for UK families, business owners and expatriates. Frozen thresholds, the inclusion of pensions, a transferable cap on farm and business relief, and a shift to residence‑based rules all mean more estates will face IHT over the coming decade. At the same time, allowances and reliefs can still help you protect your wealth if used wisely.

We encourage readers to review their estate plans now, particularly if you intend to rely on pension wealth or own farms or businesses. Taking professional advice early can help ensure your legacy passes to the next generation with minimal tax. The inheritance tax and pension rules are evolving quickly, and our team at Apex Accountants is here to guide you through it.

FAQs

Recent policy announcements have led to a surge in IHT queries. These are some of the most common questions our clients ask, with concise answers drawn from official guidance and industry sources.

1. How much can my family inherit before IHT becomes payable? 

Each individual has a £325,000 nil‑rate band and a £175,000 residence nil‑rate band. Couples can transfer unused allowances to pass on up to £1 million tax‑free.

2. Is my pension included in my estate? 

Currently, pensions are outside your estate if trustees have discretion. From April 2027, most unused pension funds and death benefits will be included.

3. What gifts can I make without triggering IHT? 

You can give away up to £3,000 each tax year without affecting your estate. Small gifts of up to £250 per recipient and wedding gifts of up to £5,000 for children are also exempt. Regular gifts from surplus income are immediately exempt if they do not reduce your standard of living.

4. Can I give my house to my children to avoid IHT? 

Yes, but you must live for seven years after making the gift to remove it from your estate. If you continue to live in the property, it counts as a gift with reservation and remains taxable.

5. Who actually pays the IHT bill? 

The tax is paid by the estate, not the beneficiaries. Executors or administrators are responsible for settling IHT before distributing assets.

6. Are the new £1 million allowances transferable between spouses? 

Yes. Any unused £1 million allowance for farm or business assets can be transferred to a surviving spouse or civil partner, giving a couple up to £2 million of relief.

7. How can farmers pay the 20% tax on assets above the allowance? 

Tax on the excess (where only 50% relief applies) can be paid over ten years without interest. Many farmers also use life insurance or gifting strategies to provide cash for future tax bills.

8. What happens to non‑UK domiciled individuals? 

From April 2025, liability for IHT depends on UK residence. An individual who has been resident for at least 10 of the last 20 years is considered a long‑term resident and is taxed on worldwide assets.

What You Need to Know About 2026 Inheritance Tax Reforms for Farmers 

Posted on by Nida Umair

The chancellor’s decision to cap agricultural property relief has shaken the farming community. From 6 April 2026, only the first £1 million of combined agricultural and business property will attract 100% inheritance tax relief. Anything above this threshold receives 50% relief, meaning an effective 20% inheritance tax (IHT) becomes payable. The inheritance tax reforms for farmers are intended to curb the use of farmland as a tax shelter for wealthy estates, but many farming families fear they will be caught in the cross‑fire. As accountants and tax advisers, Apex Accountants can help you navigate these changes and protect your legacy.

What Are The New Inheritance Changes For Farmers?

  • Cap on full relief: From April 2026, full (100%) agricultural and business property relief applies only to the first £1 million of qualifying assets.
  • 20% tax on the excess: Assets above £1 million qualify for 50% relief, leaving a 20% tax payable instead of the normal 40%. The tax can be paid over ten years, interest‑free.
  • Spousal transfers: Relief continues to be available for transfers between spouses and civil partners. Following the 2025 Budget, any unused £1 million allowance can be transferred to the surviving spouse, potentially giving a couple relief on up to £2 million of combined agricultural and business assets.
  • Other allowances remain: Each person still enjoys a £325,000 nil‑rate band and, where a main residence passes to a direct descendant, a £175,000 residence nil‑rate band. Together with the new £1 million agricultural allowance, this could allow a couple to pass on up to £3 million tax‑free.

Why Farmers Are Concerned

Many farms are asset‑rich but cash‑poor, so raising funds to pay a 20% tax may force sales of land or livestock. Farmers worry that the reforms:

  • Ignore liquidity – Land cannot be easily sold to pay a tax bill.
  • Threaten generational continuity – Family farms operate across generations, and a significant tax liability could disrupt succession.
  • Undervalue public benefits – Farms provide food security, wildlife habitats and rural jobs. Critics argue these reforms punish those contributions.
  • Risk consolidation – Smaller family farms could be forced to sell land to larger agribusinesses.

Planning Steps You Can Take To Deal With Farmers Inheritance Tax

Proactive planning before April 2026 is essential. Here are key actions farmers should consider:

  • Review ownership structures – Ensure assets are held in the most tax-efficient way. Transfers between spouses are free of IHT and can defer tax until the second death.
  • Plan the succession – Decide who will inherit the farm and whether gifts should be made during your lifetime. Lifetime gifts count as potentially exempt transfers (PETs) and fall outside IHT if you survive seven years. Using the pre‑2026 window allows unlimited relief on current transfers.
  • Ensure continued agricultural use – Land must remain in agricultural use to qualify for relief.
  • Obtain accurate valuations – Know how much of your estate might exceed the £1 million cap.
  • Update wills – Make sure your will uses both spouses’ allowances. Writing a will that leaves £1 million of qualifying assets for the next generation can utilise each spouse’s allowance and maximise relief.
  • Consider gifting – Gifting assets now, rather than on death, may remove them from your estate completely after seven years. Gift holdover relief can defer capital gains tax, meaning no CGT may be payable if you live seven years after the gift.
  • Use life insurance – A life insurance policy can provide funds to pay any IHT due if you die within seven years of making a gift. Premiums could be far lower than the potential tax liability.

Implications for Succession Planning

A well‑thought‑out succession plan is more important than ever. Farmers should prioritise personal and family wishes over tax efficiency. Consider:

  • Family aspirations – Discuss who wants to run the farm and who will benefit from the land.
  • Income needs – Ensure gifts or transfers still provide you with sufficient income during retirement.
  • Timing – Start planning early to understand the impact of the new legislation and to make appropriate arrangements.

If your children do not wish to farm, you might sell or rent out the land or structure ownership shares so that non‑farming children can benefit from the asset without running the business.

Potential Use of Trusts and Other Vehicles

Trusts can play a role in succession planning. Transferring assets into trust before the new rules apply may reduce future IHT liabilities. However, trust planning is complex, and professional advice is essential. Draft legislation indicates that each trust created before 29 October 2024 will have its own £1 million allowance, while trusts created after that date may have to share an allowance. Further adjustments are expected following a technical consultation, so ongoing monitoring is needed.

How Our Services Can Help You Navigate Farmers’ Inheritance Tax 

Apex Accountants specialises in helping farming families plan for the future. Our expertise covers:

  • Inheritance Tax and Succession Planning – We review wills, ownership structures and partnership agreements to maximise reliefs and ensure assets pass to the right people.
  • Farm Valuations and Relief Eligibility – We assess which assets qualify for agricultural and business property relief and identify potential exposure to the new 20% tax.
  • Gift and Trust Planning – Our experts advise on lifetime gifts, trust structures and potential capital gains tax implications, helping you take advantage of the pre‑2026 window.
  • Life Insurance and Funding Solutions – We work with insurance partners to arrange policies that can cover any IHT liabilities, giving your beneficiaries breathing space.
  • Business and Financial Advice – Our team provides ongoing support on cash flow, budgeting and diversification to improve profitability and resilience.
  • Environmental Schemes and Grants – We help clients access government support for sustainable farming, which can enhance income and offset tax liabilities.

If you are worried about how the reforms could affect your farm, contact Apex Accountants for personalised advice.

Conclusion

The upcoming inheritance tax changes for farmers represent the most significant change to agricultural property relief in decades. While the intention is to prevent wealthy landowners from using farmland as a tax shelter, the cap on relief may affect many family farms. By understanding the changes, reviewing ownership structures, updating wills and making strategic gifts, farming families can mitigate their impact. Early action is essential. Working with experienced advisers like Apex Accountants ensures that your farm remains viable for future generations.

FAQs About Changes To Inheritance Tax For Farmers 

What are the new farmers inheritance tax rules?

From April 2026, UK rules cap 100% Agricultural and Business Property Relief at £1m per person on combined assets. Above this, 50% relief applies, yielding a 20% effective tax rate instead of 40%. Spouses can now transfer unused allowances, doubling to £2M in full relief.

Has inheritance tax changed for farmers?

Yes, changes effective April 2026 limit full relief to £1m of qualifying farm assets per individual. Excess faces 50% relief for a reduced 20% IHT rate. Transferable allowances between spouses protect family farms up to £2m combined.

What is the agricultural relief on inheritance tax?

Agricultural Property Relief offers 100% IHT relief on qualifying farmland value up to a £1m lifetime cap from 2026. Beyond £1m, 50% relief reduces tax to a 20% effective rate. Assets need two to seven years of agricultural use.

Will farmers have 10 years to pay inheritance tax?

Yes, farmers pay IHT on excess farm assets over £1m in interest-free instalments over 10 years. This applies to APR/BPR qualifying property from April 2026. It eases cash flow without loans or immediate sales.

Are the £1 million allowances transferable between spouses? 

Yes. After Budget 2025, any unused £1 million allowance can be transferred to a surviving spouse or civil partner, potentially giving a couple up to £2 million of agricultural relief. This allowance is in addition to the transferable nil‑rate and residence nil‑rate bands.

How can I pay a 20% tax if my farm has little cash? 

The tax may be paid in equal installments over ten years, without interest. Many farmers opt for life insurance, which offers a lump sum payment upon death, or they plan to gift assets during their lifetime to minimise their tax burden.

Should I start giving away farmland now? 

Lifetime gifts can remove assets from your estate after seven years, but they may trigger capital gains tax. Under current rules, gifts made before 6 April 2026 still receive unlimited relief. Professional advice is essential to structure gifts correctly and ensure continued agricultural use.

My children do not want to farm. What are my options? 

You could sell or rent out the farm or structure ownership so that non‑farming children hold shares and receive income while another farmer runs the business. Succession planning should align with both family wishes and tax efficiency.

Will trusts help reduce inheritance tax? 

Trusts can remove assets from your estate and each trust created before 29 October 2024 has its own £1 million allowance. However, trusts established after that date may share an allowance, and rules are still being finalised. Trust planning is complex, so seek professional advice before acting.

Do small farms need to worry? 

Government estimates suggest that the wealthiest estates will pay most of the additional tax, but industry bodies argue that many more family farms could exceed the £1 million threshold when both agricultural and business assets are counted. Even modest farms with high land values may face a 20% tax on part of their estate.

What happens if the farm is jointly owned? 

Couples can combine their allowances to pass up to £2 million of qualifying assets to the next generation tax‑free. Careful drafting of wills or partnership agreements ensures both allowances are fully used.

Will there be further changes? 

The legislation is still being refined. A technical consultation is planned, and the rumoured changes include lifetime caps on tax-free gifts and extensions to the seven-year PET period. Ongoing advice is crucial as the rules evolve.

How can Apex Accountants help? 

We provide customised advice on inheritance tax planning, succession strategies, gift and trust structures, valuations, and funding solutions. We aim to help you protect your family farm and pass it on to the next generation with minimal tax burden.

Tax Rebate Owed to Deceased Estate: What You Need to Know

Posted on by Nida Umair

When a person passes away, handling their financial affairs becomes a critical responsibility for the executor. One area of concern is whether a tax rebate owed to the deceased forms part of their estate for inheritance tax (IHT) purposes. In a recent case, the UK First-tier Tax Tribunal (FTT) provided clarity on this issue, ruling that a tax rebate owed to deceased estate at the time of death should be included in the estate for IHT calculations. This decision is crucial for those managing estates and handling tax rebates, as it confirms that tax rebates are indeed treated as assets of the estate, impacting the overall inheritance tax liability.

This ruling provides both guidance and practical implications for executors and estate administrators in understanding how a tax rebate for deceased person is handled under UK inheritance tax law. The clarity on this issue ensures that tax refunds owed to the deceased are accounted for correctly, helping to avoid future disputes or errors in inheritance tax return for deceased estate submissions.

What Was the Case About?

The case involved the late Eunice Thomas, who passed away in December 2020. Eunice had been receiving income from pensions and dividends and had designated her son to manage her financial affairs via an enduring power of attorney (EPA). In May 2020, a tax return was filed on her behalf for the 2019/20 tax year, which showed an overpayment of income tax amounting to £66.03. Although the rebate was not paid before her death, the contingent right to the repayment existed at the time of death, making it an asset for inheritance tax (IHT) purposes, as per HMRC’s guidance.

Following Eunice’s passing, her son, as executor of the estate, filed an inheritance tax return for deceased estate, valuing the estate at £476,542.04, which included an estimated income tax repayment of £1,340 as part of the estate’s assets. However, the son later amended this IHT return, claiming that the tax repayment should not be included in the estate. He argued that, as the deceased had no enforceable right to the repayment at the time of death; it should not be considered property for IHT purposes.

However, as HMRC’s guidance in the Inheritance Tax Manual (IHTM28330) confirms, income tax overpayments owed at the date of death are treated as property passing on death if there is a contingent right to them, which was the case here. The son’s amendment was rejected, as section 5(1) of the Inheritance Tax Act 1984 defines property broadly, including choses in action like tax repayment claims, which must be valued at the time of death.

What Did the Tribunal Decide?

The FTT sided with HMRC, ruling that the right to the tax rebate for deceased person was indeed part of Eunice’s estate. The tribunal clarified that, while the tax rebate would only be paid after her death, the right to receive that payment existed before her passing and was therefore an asset of the estate. According to the FTT, the term “property” under the Inheritance Tax Act (IHTA) includes all forms of rights and interests, including those that may be payable in the future. Therefore, the right to a tax rebate is considered property for inheritance tax purposes, even though it would not be paid out until a later date

The FTT also rejected the appellant’s argument that the tax rebate was merely a “hope” and not a legally enforceable right. The tribunal found that the right to the repayment existed at the moment of Eunice’s death and became part of the estate, subject to inheritance tax.

Why Executors Should Include the Tax Rebate Owed to Deceased Estate in the IHT Return

This ruling serves as an important reminder to executors and administrators of estates that any tax rebates owed to a deceased individual should be included in the IHT return. Even if the rebate is not payable until a later date, the right to receive it exists as an asset of the estate. When valuing the estate for inheritance tax purposes, executors must properly account for any expected tax refunds or rebates.

It’s also worth noting that the FTT’s decision reinforces the broad definition of “property” under inheritance tax law, which includes not only physical assets like cash or property but also rights and claims, such as the right to receive a tax rebate.

How Can Apex Accountants Help With Inheritance Tax and Estate Administration?

At Apex Accountants, we offer expert services to help you manage the complexities of inheritance tax and estate administration. Whether you are an executor or a family member handling an estate, we can guide you through the process with clarity and precision.

Our services include:

  • Inheritance Tax Planning: We offer advice on how to reduce inheritance tax liabilities and ensure tax-efficient estate planning.
  • Estate Administration: We assist executors with all aspects of managing an estate, ensuring that all assets, including tax rebates, are properly included in the IHT return.
  • Tax Rebate Advice: We provide expert guidance on how income tax rebates should be treated in an estate and help ensure they are correctly included for inheritance tax purposes.
  • Final Tax Returns: Our team can assist with filing final tax returns for deceased individuals, including any income tax rebates due.
  • Asset Valuation: We ensure all assets, including intangible rights like tax rebates, are properly valued as part of the estate.

For expert advice on managing tax rebates in estates and navigating inheritance tax, contact Apex Accountants today. Our experienced team is ready to assist you with all aspects of estate administration. Book your free consultation today!

FAQs

What Happens to Tax Rebates Owed to a Deceased Person?

Tax rebates owed to a deceased individual form part of their estate for inheritance tax purposes, even if the payment is made after death.

Should Tax Rebates Be Included in an IHT Return?

Yes, any tax rebates owed to the deceased at the time of death should be included as assets in the IHT return.

Are Tax Rebates Considered Property for Inheritance Tax Purposes?

Yes, the right to a tax rebate is considered property for inheritance tax purposes, as it is a legally enforceable right.

Can a Tax Rebate Be Excluded From an Estate for Inheritance Tax?

No, unless there is a specific exemption. The right to a tax rebate is considered part of the estate and should be included in the inheritance tax calculations.

How Can I Reduce Inheritance Tax Liabilities on an Estate?

Strategic planning, such as gifting during the deceased’s lifetime, using trusts, and taking advantage of exemptions, can help reduce inheritance tax liabilities.

How the New Inheritance Tax Rules Could Reshape UK Family Businesses in 2026

Posted on by Nida Umair

From April 2026, the UK’s inheritance tax (IHT) regime will undergo a major shift that threatens to fundamentally change how family-owned businesses are passed down through generations. Under the current structure, most trading businesses qualify for 100% Business Property Relief (BPR), enabling shares or business assets to transfer to heirs without any IHT liability. This has long encouraged succession planning and family-led economic growth. However, new legislation means that only the first £1 million of qualifying business assets will be exempt from IHT. Anything above that threshold will now attract an effective 20% tax rate. For family firms that have spent decades building their legacy, the financial consequences of this reform are potentially devastating. At Apex Accountants, we work closely with multi-generational businesses to prepare for these new inheritance tax rules and secure their future.

Below, we explain what’s changing, what it means for your company, and what actions you should consider now.

What Is Changing in April 2026?

Currently, family-run trading businesses benefit from 100% BPR. This applies to both unquoted shares and interest in a partnership, allowing the entire value of the business to be passed on tax-free on death.

From 6 April 2026, that changes. The new regime will:

  • Allow only the first £1 million of qualifying trading business assets to be passed on tax-free.
  • Apply a flat 20% tax on any value above that threshold.
  • Remove full IHT relief for most medium and large-sized businesses.
  • Affect not just agricultural or land-based businesses but any trading company, including manufacturers, service firms, e-commerce brands, and more.

Example:

If your trading company is valued at £5 million, the new rules would exempt the first £1 million from tax. The remaining £4 million would attract a 20% tax bill—totalling £800,000 in inheritance tax due upon succession.

The Impact of New Inheritance Tax Rules on Businesses

Business owners are already expressing frustration and concern about these changes. Some say the move undermines long-term investment and threatens the very survival of family firms.

Entrepreneurs say they may shift investment overseas to countries with more supportive tax policies. Others are re-evaluating whether it’s still worth building long-term businesses in the UK if success leads to penalising tax bills at death.

Many family firms operate with relatively low cash reserves. While their asset value may be high (e.g. machinery, stock, land, IP), these assets are not easily liquidated. If heirs are forced to raise hundreds of thousands in tax upon inheriting the business, they may need to:

  • Sell off part of the company
  • Cut jobs
  • Take on expensive loans
  • Abandon expansion plans

This leads to loss of continuity, weakened business performance, and regional economic decline, particularly in areas where family businesses are the primary employers.

Who Will Be Affected by the Inheritance Tax Reforms?

The new inheritance tax reforms apply to all UK-based trading businesses, whether incorporated or not. You are likely to be affected if:

  • You own a business valued over £1 million.
  • You plan to pass the business on to your children, spouse, or relatives.
  • You have built a succession plan assuming full BPR relief.
  • You have not yet prepared liquidity reserves for future IHT liabilities.

Sectors that could be heavily impacted include:

  • Agriculture and Farming
  • Retail and E-Commerce
  • Manufacturing and Engineering
  • Hospitality and Food Services
  • Logistics and Transportation
  • Construction and Property Services
  • Technology and Creative Firms

Why This Matters

The government has justified the changes by stating that only a small number of wealthy estates benefit from the current relief:

While these numbers appear significant, many tax experts argue that the broader economic cost outweighs the gain. Firms may defer succession planning, reduce investment, or exit the UK entirely—resulting in lower future tax receipts, job losses, and declining regional growth.

What Should Business Owners Do Now?

To protect your business and your legacy, we strongly advise early preparation. Apex Accountants is already supporting clients with tailored IHT mitigation strategies.

Here’s what you should consider:

1. Get a Formal Business Valuation

Understanding your business’s real market value is the first step. This will help determine whether you’ll be exposed to the £1m threshold.

2. Review or Draft a Will Immediately

Ensure your will reflects current ownership and includes tax planning clauses. If you don’t have one, you risk default HMRC treatment.

3. Explore Employee Ownership Models

Selling to an Employee Ownership Trust (EOT) can reduce tax exposure while preserving company culture. Capital gains tax is also avoided.

4. Set Up Family Trusts

Discretionary trusts and family investment companies can reduce future liabilities, though these structures must be planned carefully.

5. Start Building Cash Reserves

Prepare your successors by ensuring they have funds available to meet any future IHT bill without having to sell parts of the business.

6. Seek Professional Tax Advice

You’ll need accountants and solicitors with experience in inheritance tax, trusts, and corporate structuring to protect your business.

How Apex Accountants Support Family Businesses

At Apex Accountants, we’ve helped hundreds of UK family-run businesses plan for succession, mitigate tax exposure, and retain generational ownership. We provide:

  • Inheritance Tax Forecasting and Planning

Accurately project future IHT liabilities under the new rules and build a IHT mitigation strategies roadmap.

  • Business Valuation and Asset Segmentation

Full company valuation, including goodwill, fixed assets, property, and IP rights.

  • Succession Planning Strategies

Support for gradual handover of shares, staggered gifting, and exit planning.

  • Legal Coordination for Wills & Trusts

Liaising with legal teams to structure trusts, ownership vehicles, and family wealth transfers.

  • Employee Ownership Trust Advisory

Guidance on establishing EOTs to maintain business continuity and tax efficiency.

  • Liquidity and Exit Planning

Help build capital reserves, plan disposals, or raise funds for tax obligations.

Whether your business is worth £2 million or £20 million, our priority is to protect your legacy and ensure you don’t pay more tax than necessary.

Frequently Asked Questions on New Inheritance Tax Reforms

What is Business Property Relief (BPR)?

BPR allows qualifying trading business assets to be passed on free of inheritance tax. From April 2026, only the first £1 million will qualify.

Will these changes apply to all businesses?

Yes, the new rules apply to all UK trading businesses—agricultural or non-agricultural—if their value exceeds £1 million.

How much inheritance tax will my family pay after April 2026?

Your family will pay 20% on the portion of business value above £1 million. A £4 million business would generate a £600,000 tax bill.

Can I transfer shares to my children now to avoid tax?

Early planning may help reduce future IHT, but gifting shares comes with capital gains tax (CGT) implications. Professional advice is essential.

What if I don’t do anything?

Your estate may face a large, unexpected tax bill. Your family may be forced to sell assets, take out loans, or dismantle parts of the business.

Are there ways to avoid or reduce the tax legally?

Yes. Tools include trusts, EOTs, family investment companies, and lifetime gifting—but these must be structured well in advance.

Will farms and rural businesses still get relief?

Only up to £1 million in total value. Beyond that, they too will face the 20% charge, regardless of land size or history.

What happens if my business is partly trading and partly investment?

Mixed-use businesses may not qualify fully for BPR. The investment portion (e.g. rental properties) could be fully taxable.

Is employee ownership a good idea?

For some firms, yes. It avoids CGT at the point of sale and transfers ownership gradually, keeping jobs and culture intact.

When should I start succession planning?

Immediately. The earlier you act, the more tools are available. Don’t wait until April 2026—it may be too late.

Strategic Inheritance Tax Planning for Family Investment Companies in the UK

Posted on by Rana Zubair

Rising property and investment values mean more UK families face Inheritance Tax (IHT) on their estates. To manage this effectively, many now use Family Investment Companies (FICs)—a flexible way to transfer wealth while keeping control. At Apex Accountants, we specialise in inheritance tax planning for family investment companies, helping families protect assets, maintain governance, and manage long-term tax exposure. 

This article outlines how FICs work, the key tax considerations involved, and how our experts design practical, compliant strategies to support sustainable family wealth succession planning.

What Is a Family Investment Company?

A Family Investment Company is a private limited company established to hold and manage family assets. The company usually holds investments such as:

  • Cash or investment portfolios
  • Property and land
  • Shares or units in other funds

Parents often retain control through voting shares, while children or trusts have their own non-voting growth shares. This approach allows parents to direct investments while future growth moves outside their estate for IHT purposes.

Why Families Choose Family Investment Companies

Families use FICs to achieve several financial and succession goals:

  • Maintain long-term control over assets and income
  • Pass wealth to children in a structured, gradual way
  • Separate control (voting rights) from ownership (economic benefit)
  • Protect family wealth from external claims or marital breakdowns
  • Create a clear governance framework for decision-making

This approach is central to effective family wealth succession planning, ensuring smooth transitions of assets between generations.

How a Family Investment Company Helps With Inheritance Tax

Gradual Wealth Transfer

Parents can gift growth shares to their children. These gifts are Potentially Exempt Transfers (PETs) and fall outside the estate after seven years. It allows parents to transfer future growth while keeping control.

Tax-Efficient Growth

An FIC pays corporation tax on profits rather than higher personal income tax rates. Retained profits can be reinvested, compounding long-term family wealth.

Estate Value Reduction

Over time, as value shifts to growth shares held by younger family members, the parents’ estate value reduces—potentially lowering IHT exposure.

Use of Loans for Flexibility

Parents can fund the FIC through loans instead of gifts. Loan repayments then remove capital from the company gradually without triggering new tax charges.

Key Tax Considerations

Inheritance Tax

  • PETs are exempt if the donor survives seven years.
  • Chargeable Lifetime Transfers (CLTs) to trusts may trigger lifetime IHT above the nil-rate band.
  • Gifts with Reservation of Benefit (GWR) can bring assets back into the estate if the donor retains benefit.
  • Pre-Owned Assets Tax (POAT) may apply where benefits are retained.

Corporation Tax

  • The FIC pays corporation tax on investment income and gains.
  • Dividends from UK companies are usually exempt from corporation tax.
  • Reinvested profits grow inside the company more efficiently.

Capital Gains Tax

  • Transferring assets into the FIC may trigger CGT on the donor.
  • Holdover relief can defer CGT on gifts to certain trusts.
  • Professional valuation is essential before transfers.

Income Tax

  • Shareholders pay income tax on dividends they receive.
  • Dividends distributed to minor children may be taxed on the parent under “settlements” rules.

Common Family Investment Company Structures

  1. Parents as Directors and Voting Shareholders – Maintain full control of company decisions and distributions.
  2. Children or Trusts as Non-Voting Shareholders – Hold growth shares that appreciate outside the parents’ estate.
  3. Use of Family Trusts – Adds protection and flexibility for future generations while trustees manage distributions.

Example: How It Works in Practice

A client approached Apex Accountants seeking an effective way to pass wealth to their children while maintaining control and staying compliant with UK tax law. After assessing their goals, we recommended establishing a Family Investment Company (FIC).

The parents invested £1 million—£800,000 as a director’s loan and £200,000 as share capital. They held voting shares, while their children received non-voting growth shares, allowing control to remain with the parents while future growth moved to the next generation.

The FIC invested in property and equities, with profits taxed at corporation tax rates and reinvested. Over time, loan repayments reduced the parents’ estate, and the children’s shares increased in value.

Through careful planning and documentation, Apex Accountants helped the family transfer wealth efficiently, reduce potential IHT exposure, and preserve long-term financial control.

When an FIC May Not Be Suitable

An FIC may not be the best option for:

  • Families seeking immediate access to assets
  • Estates with limited liquidity or small asset bases
  • Situations where gifts are needed urgently rather than gradually

In such cases, alternatives such as trusts, life insurance, or outright PETs may work better. Apex Accountants assess all options before recommending an appropriate structure and can provide tailored inheritance tax advice for family investment companies when needed.

Our Step-by-Step Approach at Apex Accountants

  1. Consultation and Goal Setting – Understand control, protection, and distribution priorities.
  2. Tax Planning – Review IHT, CGT, and income tax implications.
  3. Structure Design – Determine share classes, funding method, and trust integration.
  4. Incorporation and Setup – Register the company and prepare all agreements.
  5. Ongoing Compliance – Maintain company records, accounts, and tax filings.
  6. Annual Review – Monitor family and tax changes to update structure.

Tailored Guidance from Apex Accountants on Inheritance Tax Planning for Family Investment Companies

At Apex Accountants, we combine tax expertise with practical experience in wealth succession. Our qualified advisors design structures that are compliant, efficient, and sustainable.

We provide:

  • Tailored IHT and corporate tax planning
  • Transparent share and loan structuring
  • Ongoing governance and compliance support
  • Detailed valuations and financial modelling
  • Regular reviews aligned with tax law updates

Our specialists also deliver strategic inheritance tax advice for family investment companies, helping families implement long-term governance and tax-efficient structures.  With our proactive guidance, your Family Investment Company can become a cornerstone of lasting intergenerational success.

Contact Apex Accountants today to arrange a free initial consultation and start building a clear, tax-efficient inheritance plan for your family.

Additional FAQs

Can offshore investments be held in an FIC?
 Yes, but the FIC remains subject to UK tax rules. Reporting obligations under anti-avoidance and controlled foreign company (CFC) rules must be considered.

Can an FIC be wound up or sold later?
 Yes. Winding up an FIC may create CGT and distribution tax implications. Selling the company may be efficient if structured correctly. Apex Accountants can help model the exit tax outcomes.

How does an FIC interact with the parents’ wills?
 Company shares and loans should align with your will and estate plan. We coordinate with solicitors to keep documents consistent and compliant.

What happens if family members live abroad?
 Cross-border ownership may create double-taxation or residency complications. Specialist advice is needed to address local tax and reporting obligations.

Can charitable giving be included within an FIC?
 Yes. A family can include charitable donations through corporate giving or by establishing a charitable trust linked to the company.

IHT change of domicile

Posted on by Rana Zubair

It is possible in certain circumstances for an individual to have two domiciles although this is unusual. There is a concept in the UK of deemed domicile, whereby any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes.

Before 6 April 2017, a person was treated as UK domiciled if they were resident in the UK for 17 of the 20 years of assessment ending with the year in which the relevant time fell. These rules are intended to prevent those with the most significant links to the UK from claiming non-dom status.

There is also a three-year rule that applies to a taxpayer who was domiciled in the UK on or after 10 December 1974 and at any time within the three calendar years before the relevant event (the death or gift). If either rule applies then, in most cases, HMRC will treat the person as domiciled (deemed domicile) within the UK for Inheritance Tax purposes.

The deemed domicile rules, or an election to be treated as domiciled in the UK, do not apply under certain limited circumstances. This includes double tax treaties and means that individuals from France, Italy, India or Pakistan cannot usually become deemed domiciles.

Source: HM Revenue & Customs Tue, 03 Aug 2021 00:00:00 +0100

Who pays Inheritance Tax?

Posted on by Rana Zubair

Inheritance Tax (IHT) is commonly collected on a person’s estate when they die but can also be payable during a person’s lifetime on certain trusts and gifts. The rate of IHT currently payable is 40% on death and 20% on lifetime gifts.  IHT is payable at a reduced rate on some assets if 10% or more of the 'net value' of their estate is left to charities.

Funds from the estate of the deceased are usually applied to pay IHT. If there is a will, it is usually the executor who deals with paying any IHT due to HMRC. IHT can be paid from funds within the estate, or from money raised from the sale of the assets. The deceased may also have used a life insurance policy to fund the payment of some / all the IHT due.

There is a nil-rate band, currently £325,000 below which no IHT is payable. In addition, there is an IHT residence nil-rate band (RNRB) which relates to a main residence passed down to a direct descendent such as children or grandchildren. The RNRB of £175,000 (where available) is on top of the £325,000 IHT nil-rate band.

The recipient of gifts from the deceased may be personally liable to IHT if the deceased gave away more than £325,000 in the 7 years before their death. These lifetime transfers are known as 'potentially exempt transfers' or 'PETs'. The rate of IHT gradually reduces over the 7-year period becoming exempt from IHT after 7 years have passed.

Some gifts will typically be tax-free from the time they are made such as regular gifts made from excess income, the first £3,000 worth of gifts each tax year and gifts between spouses and civil partners.

Source: HM Revenue & Customs Tue, 27 Jul 2021 00:00:00 +0100
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