Harry Morrison, Investment Analyst & Panel Consultant at MICAP from Defaqto has provided a tax-year end toolkit, withthe past 18 to 24 months have seen a raft of changes to theinheritance tax (IHT) and tax-advantaged planning landscape.
Announcements in the Autumn Budgets of 2024 and 2025 have reshaped the way Business Relief (“BR”) and Agricultural Property Relief (“APR”) will operate, creating both challenges and opportunities for financial advisers and their clients. With asset values continuing to rise and IHT thresholds remaining frozen, advisers are increasingly being called upon to help clients reassess estate planning strategies and ensure allowances are used efficiently before the new rules take effect.
The inheritance tax nil rate band has been frozen at £325,000 since 2009 (or up to £500,000 where a main residence is left to direct descendants) and as currently stated will remain frozen until at least April 2031. This prolonged freeze is expected to pull more estates into the IHT net as values increase, intensifying the need for proactive planning.
At the same time, pensions are set to be brought into the scope of IHT from April 2027, fundamentally changing how many people view pensions as part of their estate planning strategy. BR and APR remain key tools, though they too have been reformed. Following consultation, the Government confirmed that from 06 April 2026, up to £2.5 million of combined qualifying business and agricultural assets will attract 100% BR/APR, rising to £5 million for spouses or civil partners through transferability.
Values above £2.5 million will receive 50% relief, creating an effective 20% IHT charge on the excess. Shares listed on the AIM market will qualify for BR at 50% relief regardless of the allowance. The £2.5 million allowance as currently stated will be frozen until at least April 2031.
Since the announcement of a BR and APR allowance in the 2024 Budget, both the limit and the transferability between spouses or civil partners have changed before the proposal has come into effect on 06 April 2026. Ensuring advisers and clients are up to date with the legislations is key.
For advisers, tax-year end planning should now include a thorough review of client exposure to these upcoming changes. Key actions include reassessing asset values and relief usage as clients with business or agricultural assets approaching or exceeding the £2.5 million. Identifying this early allows time to explore mitigation strategies. Additionally, with allowances now transferable between spouses and civil partners, ensuring assets are structured to maximise combined reliefs is essential.
Advisers should consider whether existing holdings remain appropriate within an IHT strategy and how any changes could affect the two-year qualifying period. Advisers also need to be aware of the pension changes from April 2027. Any unused pensions will form part of the taxable estate which may increase overall IHT exposure and place greater emphasis on other reliefs, including BR.
Despite clearer direction following the 2025 Budget, uncertainty remains. Draft legislation and policy papers were published in July 2025, but some technical aspects are still under consideration, particularly around the interaction between trusts, AIM holdings and the revised relief limits.
In addition, while the Government has confirmed that personal representatives will remain responsible for reporting and paying IHT on unused pension funds from April 2027, the supporting information-sharing framework has yet to be finalised.
In this environment, advisers can add real value by taking three practical steps: consistently reviewing client portfolios, leveraging support from specialist third parties such as MICAP from Defaqto, and staying closely informed about HMRC updates and further draft legislation.
There are several changes coming into effect as we move into the new tax-year around tax-efficient investments and a proposed reduction in the limit of cash ISAs to £12,000. It is therefore important to ensure not only that portfolios are invested in the right underlying assets, but also that the investment structure will remain appropriate following any changes in legislation.
While the rules are changing on the qualifying criteria for EIS and VCT qualifying companies, this comes at a cost for VCT investors, with a proposed shift to 20% upfront income tax relief from April 2026.
It will be interesting to observe how these changes influence both new and existing investors. Even before the change in upfront income tax relief VCT inflows this tax-year have been steady, with the majority of the VCTs fundraising still open for new investors. The industry is expecting even slower fundraising next year unless there is a reversal of the proposal.
It should be noted; however, that the changes announced by the Government has given the tax-advantaged world some much needed advertising. While BR and APR were once seen as niche planning tools, the Autumn Budget changes have firmly moved them into the mainstream.
Additionally, research supports the growing importance of this area with MICAP from Defaqto identifying an expected increase in the use of BR planning following the proposed changes.
As tax-year end approaches, advisers who understand the nuances of the new rules and act early can help clients protect wealth, manage future IHT exposure and bring clarity to an increasingly complex landscape. In a world of frozen thresholds, expanding estates and evolving reliefs, a well-structured tax-year end assessment has never been more important.
For further insights or due diligence tools, MICAP from Defaqto offers comprehensive platform-based comparisons of tax-advantaged products to support financial advisers making well-informed decisions.
Written by Harry Morrison, Investment Analyst & Panel Consultant at MICAP from Defaqto.
This piece featured in the latest issue of Tax-Efficient Investment (TEI) Magazine, which you can read here!
About Harry Morrison
In 2018, Harry joined MICAP as an Investment Analyst and Panel Consultant, contributing to MICAP Reviews and delivering Panel Support Services to clients through data-driven insights and strategic recommendations. Following MICAP’s acquisition by Defaqto in 2023, Harry continues in this role as part of the Defaqto team, supporting the wider business with his expertise in investment analysis, research and client services.
