Will Inheritance Tax Change in 2026? How to Prepare for What Might Come Next

Belgravia Capital
May 31
4 min read

After the sweeping inheritance tax (IHT) reforms announced in the Labour government’s 2024 Autumn Budget, many families are now asking a logical follow-up:

“Will inheritance tax change in 2026?”

The answer is likely yes - and potentially in significant ways.

With some reforms already scheduled to take effect in April 2026 and others under consultation, UK families need to begin planning for what may be a more restrictive and complex inheritance tax regime in the near future.

At Belgravia Capital Wealth Management, we help individuals and families prepare not only for what’s confirmed, but for what’s coming.

This guide explains what’s already changing in 2026, what else might shift, and what you should be doing now to stay ahead.

Confirmed Inheritance Tax Changes Coming in April 2026

Several major IHT reforms from the 2024 Budget are scheduled to take effect in April 2026. These are locked in and will directly affect how estates are taxed:

Reduction of Business Property Relief (BPR) for AIM Shares

Relief for AIM-listed shares will drop from 100% to 50%
A 20% IHT bill will now apply to portfolios that previously attracted no tax

Cap on Business and Agricultural Relief

A combined lifetime cap of £1 million per individual will apply to BPR and Agricultural Property Relief (APR)
Any value above this will be taxed at 20%, meaning wealthier families in farming, landholding or private business ownership will face new liabilities

Frozen Allowances Until 2030

The £325,000 nil-rate band and £175,000 residence nil-rate band will remain unchanged until April 2030
In real terms, this drags more estates into the IHT net as inflation and property prices rise

These measures alone will result in significantly more estates facing inheritance tax - and larger bills when they do.

Potential Additional Changes in or by 2026

Labour’s initial reforms have created the foundation for a new, more progressive inheritance tax framework.

But based on consultation documents and signals from party insiders, there are several other possible developments on the horizon:

Trust Reform

Discretionary trusts may face tighter regulation, higher reporting requirements, or changes to their IHT treatment
The government may restrict the duration or value that can be held in trusts without additional tax charges
Lifetime charges (currently 20%) may be recalibrated, or a flat rate inheritance tax may apply to all trust-held assets

Reform or Removal of the Residence Nil-Rate Band

The £175,000 residence allowance has been criticised for favouring property owners and excluding non-direct descendants
Labour may simplify IHT by scrapping this band entirely or folding it into a new single threshold

Lifetime Receipts Tax

A longer-term proposal being explored involves taxing individuals on the total amount of inheritance they receive over their lifetime, rather than taxing the estate at death
This model could increase transparency and fairness but would be more complex to administer

New Reporting Rules on Lifetime Gifts

HMRC may introduce mandatory reporting of all lifetime gifts over a certain threshold - regardless of when they are made - to improve tax transparency and reduce evasion

Taxation of UK Property Held via Offshore Entities

Expect further crackdowns on non-domiciled and international structures used to avoid IHT on UK assets

These reforms would represent a shift from the current estate-based approach to a more beneficiary-focused tax system, aligning with broader global trends.

Who Will Be Most Affected by 2026 Changes?

Families with:

Business interests or agricultural land
AIM share portfolios
Property-rich estates
Discretionary trusts
Children or grandchildren inheriting more than £500,000
Large lifetime gift transfers

These groups are especially vulnerable to rising inheritance tax exposure if they don’t take action before April 2026.

IHT Planning Steps You Should Take Now (Before 2026)

Use Current Reliefs While You Can

If you qualify for 100% BPR or APR now, consider:

Transferring assets in 2025 while full reliefs still apply
Rebalancing portfolios to reduce future IHT exposure

Consider Gifting Strategies Early

Gifts made now trigger the 7-year rule, so time is of the essence
Maximise annual exemptions and gifts from surplus income

Establish Trusts Before Rules Tighten

Setting up a discretionary trust before April 2026 may preserve more favourable treatment under current rules
Bare trusts may remain useful depending on the government’s final position

Equalise Spousal Estates

Ensures that both partners’ nil-rate and residence nil-rate bands are fully used
Avoids overloading one estate with tax liability

Set Up Whole-of-Life Insurance Policies

Use insurance in trust to fund your expected IHT bill
Protect illiquid assets like property or business interests from being sold to pay tax

Review Pensions and Succession Plans

From April 2027, pensions will be included in the estate for IHT, so long-term retirement planning should be reviewed now

Case Study: Business Owner Planning Ahead for IHT

James is a 65-year-old owner of a family manufacturing business valued at £4 million.

Under current rules, he could pass this business to his children using 100% BPR - saving £1.6 million in tax.

However, from April 2026:

BPR relief is capped at £1 million
Excess value is taxed at 20%

Without planning, the family could owe £600,000 in inheritance tax, even though the business remains operational.

By transferring the business in 2025, using a trust structure and establishing a life insurance policy, James can eliminate the liability altogether, but only if he acts before the new rules take effect.

How Belgravia Capital Wealth Management Can Help you Mitigate Inheritance Tax

We specialise in inheritance tax planning for high-net-worth individuals, business owners, landowners, and families.

Our services include:

Strategic planning to use reliefs before deadlines
Trust creation and management
Gifting strategies and reporting guidance
Insurance planning for tax liabilities
Estate equalisation and spouse allowance maximisation
Intergenerational wealth structuring

We act early, decisively, and in coordination with your legal and financial advisers to give you the best outcome under changing laws.

Conclusion: Will Inheritance Tax Change in 2026?

Yes, and the changes are already underway.

With the 2024 reforms taking effect in April 2026, and additional rule changes likely to follow, families should not delay planning.

Waiting until legislation is finalised could mean missing out on generous reliefs or being caught unprepared by new limits and obligations.

Take control of your estate before the window closes.