If you own a business or farm, review your will. The 100% IHT deduction for the value of business and agricultural property combined is capped at £2.5 million. Above that value relief is at 50% – in effect reducing the rate of IHT from 40% to 20%. Unused allowance can be transferred from the estate of a spouse, and if your spouse died before 6 April 2026, the full £2.5 million allowance can be transferred. However, the survivor must have qualifying business or agricultural property to use the allowance against. Wills often state that assets qualifying for business or agricultural relief are to go to a child or children on the first death, with the spouse inheriting other assets. This now will often not be the best strategy. Take professional advice to review your will.
CHECKLIST
Update your will if your circumstances have changed or to take account of changes to IHT for businesses and farms Consider legalising your relationship Plan how to maximise the use of your nil rate bands on death – don’t forget your late spouse’s or civil partner’s nil rate bands Consider sharing ownership of a business, farm or unlisted shares with your spouse to benefit from two 100% allowances of £2.5 million Consider a charitable legacy in your will to reduce the rate of IHT payable on death Make regular gifts out of your net income to reduce the value of your estate
You can mitigate the risk by investing in AIM portfolios
Invest in businesses to save IHT. The 100% IHT deduction and 50% relief (see previous tip) are also available for shares in unlisted trading companies if you hold them for at least two years; you don’t have to be involved in the company for the shares to qualify. However, such investments are high risk and difficult to sell. You can mitigate the risk by investing in AIM portfolios, but relief is only 50% for such shares and AIM portfolios have generally underperformed the market.
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