Financial advisers and paraplanners may need to revisit estate planning strategies for business owners and investors ahead of significant changes to business relief and agricultural relief from April 2026.
Aberdeen Adviser has highlighted several key planning considerations advisers may need to review with clients, including:
- A new £2.5 million cap on assets qualifying for 100 percent business and agricultural relief from inheritance tax
- A reduction in relief for AIM shares from 100 percent to 50 percent
- Greater importance of lifetime gifting strategies for clients with larger business interests
- Additional complexity when combining business relief planning with trusts and capital gains tax considerations
From 6 April 2026, the amount of qualifying business and agricultural assets eligible for 100 percent relief from inheritance tax will be limited to £2.5 million. Assets above this threshold will receive relief at 50 percent. At the same time, shares listed on the Alternative Investment Market will no longer qualify for full business relief and will instead receive relief at 50 percent.
Aberdeen Adviser said the reforms introduce new planning considerations for advisers supporting clients who rely on business assets or AIM portfolios as part of their inheritance tax planning.
Andy Zanelli, Head of Technical Engagement at Aberdeen Adviser, said:
“Business relief has long been an important part of inheritance tax planning for business owners and investors. The introduction of a £2.5 million allowance represents a meaningful shift and means advisers will need to revisit some existing strategies with clients.”
“For many clients the interaction between the new allowance, lifetime gifting rules and trust planning will require careful consideration. The detail matters and there are several areas where the outcomes may not be immediately obvious.”
Under the new framework, the £2.5 million allowance will apply to qualifying business and agricultural assets receiving full relief. Any value above that level will receive relief at 50 percent. The allowance will be transferable between spouses and civil partners in a similar way to the inheritance tax nil rate band, allowing up to £5 million of qualifying assets to benefit from full relief on second death.
Zanelli said the changes may prompt some clients to reconsider whether assets should be transferred during their lifetime rather than at death.
“For clients with businesses or qualifying assets above the allowance, lifetime gifting may become a more prominent part of planning discussions. Gifts to individuals can be potentially exempt transfers, while gifts into trust will have different inheritance tax implications that need to be carefully assessed.”
The reforms also affect AIM portfolios, which have often been used in inheritance tax planning. From April 2026 these investments will qualify for relief at 50 percent rather than 100 percent.
“This is likely to prompt a review for clients who have incorporated AIM portfolios into their inheritance tax planning. The reduction in relief means advisers will need to consider how these holdings fit alongside other estate planning strategies.”
Zanelli added that the interaction between business relief, capital gains tax and trust rules means careful planning will be required.
“Gifting assets can reduce inheritance tax exposure but may also create capital gains tax consequences. Advisers and paraplanners will need to weigh these factors carefully to ensure planning decisions deliver the right long-term outcomes for clients.”
The changes to business relief and agricultural relief will take effect from 6 April 2026.
