The 2026 changes to Inheritance Tax: what families need to know

CREATED BY HELEN BEAUMONT Published: 25/02/2026 @ 09:00AM #changestoInheritanceTax #InheritanceTax #EstatePlanning #HMRC #UKTax #FinancialPlanning

Here's the practical view on the changes to Inheritance Tax in 2026, and why 'frozen' can still mean 'costly'. It covers the sticking points around thresholds, new relief limits for businesses and farms, and why AIM and pensions may need a rethink ...

Changes to Inheritance Tax, Challenge legacy's grasp, Families may shift

Most families will not feel the changes to Inheritance Tax in 2026 as a sudden shock; it will be more like noticing the tide has come in only after the sand has disappeared. The headline rate may look familiar, but the rules around what gets sheltered, and what slowly drifts into charge, are exactly where real-life costs tend to appear.

The quiet issue is that the Inheritance Tax threshold
is not rising with everything else!

When the nil rate band in 2026 remains at £325,000, and the residence allowance remains at £175,000, the maths is simple: more estates are nudged over the line even when people do not think of themselves as wealthy. This is the kind of predictable policy outcome that is easy to overlook until HMRC is asking for figures and deadlines.

For couples, the combined allowances can still be substantial when everything lines up, especially if assets pass to a spouse first and the available bands transfer. Yet what looks generous on paper can be squeezed by ordinary house price growth, especially in areas where even an average family home now consumes most of the tax-free space by itself. Seen through that lens, the changes to Inheritance Tax in 2026 are as much about what stays fixed as what is being rewritten.

Business owners and farming families are the group
most likely to notice a more visible shift!

Reliefs for qualifying trading and agricultural assets are being reshaped so that there is a clear allowance where 100% relief applies, followed by a reduced level of relief above it. The practical implication is that a family business can still be protected to a high level, but the plan needs to be measured against the new allowance rather than assumed to be fully covered indefinitely.

This is where estate planning stops being an abstract exercise and becomes a set of numbers that must be stress-tested.

The transferable nature of these relief allowances between spouses matters because it changes the optimal sequencing of who owns what and when. A structure that was 'good enough' under older assumptions might now waste relief, or concentrate value in one estate without meaning to. In other words, reduced Inheritance Tax rewards coordination, not just ownership.

Investors who have used AIM portfolios for inheritance mitigation should also pause. Relief that once removed, the value from charge can become only a partial shield under the tightened rules, which means the risk profile is no longer just about market volatility; it is about whether the expected tax saving still compensates for the investment characteristics. It is a strategic decision, not a box-ticking exercise, and it deserves to be revisited with current assumptions rather than legacy comfort.

Pensions sit slightly further down the timeline, but they
should still influence 2026 decisions!

If unused pension wealth is brought into the inheritance calculation from 2027, many families will want to rethink which assets are spent first, which are preserved, and how beneficiary nominations align with the broader estate.

The unpleasant scenario to plan around is a family facing both inheritance charges and later income tax on what is received, which is exactly the sort of double-friction outcome that good estate planning tries to prevent.

The practical takeaway is that the rules are becoming more technical at the edges, even if the headline rate is unchanged. Wills written years ago may still be valid, but 'valid' is not the same as 'efficient', and what HMRC will accept as qualifying or transferable can depend on details that are easy to miss when assets, ownership, and intentions have evolved.

A sensible next step is not panic, but a review that treats the estate as a system: property value, business interests, investment wrappers, pension intentions, and the order of gifting or transfers. Done properly, it turns the changes to Inheritance Tax in 2026 from a vague worry into a set of manageable decisions.

And those can be made on purpose rather than by default.

Until next time ...

HELEN BEAUMONT
Join my mailing list! Click here and be one of the first to know when I publish a new blog post!

Share the blog love ...

Buffer Facebook Twitter Linkedin Pinterest WhatsApp #changestoInheritanceTax #InheritanceTax #EstatePlanning #HMRC #UKTax #FinancialPlanning

About Helen Beaumont ...
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist. Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance. When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.

More blog posts for you to enjoy ...
		Why HMRC's cryptoasset disclosure service has raised only £4m so far HMRC's cryptoasset disclosure service has brought in only about £4m, despite tens of thousands of nudges. That gap hints at low awareness, wishful thinking, or simple avoidance. This is what it means for crypto tax, and why a...
		Top tax tips for smart year-end tax planning before April Here are top tax tips to tidy up savings, ISAs, pensions and gains before April. It's a friendly run-through of what people miss and how to fix it. Think of it as a quick chat that could save real money ......
		Ground rents to be capped: what the new £250 limit means Ground rents will be capped at £250 from 2028, and the rules mostly target future homes rather than existing leases. It's part of wider leasehold reform and a push towards commonhold.The direction is clearer, but today's leas...
		Why late tax return penalties keep rising as HMRC clamps down Late tax return penalties are rising because more tax goes unpaid, and HMRC is pushing harder. If you're late, the costs can stack up quickly, but you can sometimes challenge mistakes or agree on a payment plan. So always act...
		Can't pay your self-assessment bill by the 31st of January? If you can't pay your self-assessment bill by the 31st of January, don't hide from it. Get the numbers right, pay what you can, and talk to HMRC early about a time to pay arrangement. You'll usually reduce late payment penalt...
		UK tax returns and the mid-year Capital Gains Tax rate change in 2024/25 The mid-year Capital Gains Tax rate change means HMRC's online return may miscalculate CGT after the 30th of October 2024. Taxpayers may need to compute an adjustment and enter it manually. A careful check now can prevent und...
		New Year Nudge: Beat the self-assessment filing deadline without stress Here's the simple reality of the self-assessment filing deadline: it doesn't move, but your stress can. My blog post this week explains why filing early helps, what HMRC charges for delays, and how an online tax return can ke...
		HMRC Taking A Good Look At Savvy Online Sellers HMRC's new data sharing initiative, which aligns with the OECD's global objective to tackle tax evasion, has been met with mixed reactions from online sellers ......

Other bloggers you may like ...
		Practical ways an Online PA can support landlords Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk Here's how an Online PA can support landlords without the stress. Keep paperwork, deadlines, and tenant updates moving in the right order. It's practi ...
		The Art Of Bowing Out Gracefully Posted by Jacky Sherman on https://www.jackysherman.com Conceived on your kitchen table, down the pub, after a particularly frustrating meeting with your boss, or that awful moment when you were told you we ...
		Opening a new hospitality venue: why good IT planning saves years of hassle Posted by Andrew Parker on https://blog.wolvertonsolutions.com Opening a venue is exciting, but the tech can quietly make or break the day-to-day. Good IT planning keeps networks, internet, POS, and security align ...
		Are AI tools disruptive to the human psyche in modern life? Posted by Pritesh Ganatra on https://blog.btsuk.net Are AI tools disruptive in ways people don't notice until things feel off? This post looks at why younger adults ask AI for life advice, where the ris ...