Inheritance Tax Planning in Leicester Changes in 2026 and 2027

The Inheritance Tax thresholds for 2026 and 2027

The standard nil-rate band is £325,000. A residence nil-rate band of up to £175,000 may also apply when a qualifying home passes to direct descendants. This can provide an individual threshold of up to £500,000, subject to the detailed rules.

Unused allowances can usually pass between spouses and civil partners, potentially giving a couple combined allowances of up to £1 million. Amounts above the available allowances are generally taxed at 40%. A 36% rate may apply when at least 10% of the net estate is left to charity.

The allowances available to you depend on your estate and how assets pass, so the headline figures should not be treated as a personal calculation.

For a broader introduction, read our beginner’s guide to Inheritance Tax.

Changes for family businesses and farms from April 2026

From 6 April 2026, a £2.5 million allowance applies to the combined value of qualifying business and agricultural property receiving 100% relief. Qualifying value above the allowance receives 50% relief. This can result in an effective Inheritance Tax rate of 20% on that excess value.

Any unused part of the allowance can transfer to a surviving spouse or civil partner. The rules also include separate provisions for trusts and certain shares, so families should review the ownership and structure of their assets before assuming the allowance will apply in full.

For owners hoping to pass a farm or family business to the next generation, succession planning now needs to consider how any liability could be funded without disrupting the business.

Changes for pensions from April 2027

From 6 April 2027, most unused pension funds and death benefits are due to be included in a person’s estate for Inheritance Tax purposes. This changes the way pensions may fit into estate planning.

If you have previously planned to spend other assets first and preserve your pension for beneficiaries, that approach may need to be reviewed. The right order for drawing income will depend on your full financial position, tax circumstances and family plans.

Ways to reduce a potential Inheritance Tax bill

Possible planning options include using available exemptions, making lifetime gifts, leaving part of an estate to charity and making full use of allowances between spouses or civil partners. Trusts can also be useful in some circumstances, but they bring legal, tax and administrative responsibilities.

Gifts made during your lifetime can be valuable for reasons beyond tax. You may be able to help your children or grandchildren at the point they need it and see the difference it makes. However, you should first be confident that you have retained enough for your own future.

Our article on speaking to your beneficiaries as part of your estate plan explains why the family conversation matters alongside the legal and financial work.

The role of wills powers of attorney and trusts

A current will helps make your wishes clear. Lasting Powers of Attorney allow trusted people to make decisions if you are unable to do so. A letter of wishes can provide personal guidance that does not sit naturally in a formal will.

You can learn more about the protection offered by a Lasting Power of Attorney at different stages of life.

Trusts are not necessary for every family. They are most useful when there is a clear reason for controlling how assets pass, protecting a vulnerable beneficiary or managing family assets over time. Legal and financial advice should work together when a trust is being considered.

Frequently asked questions

What is the Inheritance Tax threshold?

The standard nil-rate band is £325,000. An additional residence nil-rate band of up to £175,000 may apply when a qualifying home passes to direct descendants. Individual circumstances and estate values can restrict the allowances available.

What changed for businesses and farms in April 2026?

A £2.5 million allowance now applies to qualifying agricultural and business property receiving 100% relief. Qualifying value above this receives 50% relief.

What is changing for pensions in April 2027?

Most unused pension funds and death benefits are due to form part of the estate for Inheritance Tax purposes from 6 April 2027.

Can I give money away to reduce Inheritance Tax?

Lifetime gifts may reduce the value of an estate, but different exemptions and time limits apply. You should also consider your own future spending and care needs before giving assets away.

Do I need a solicitor and a financial planner?

They have different roles. A solicitor can advise on wills, trusts and legal ownership, while a financial planner can model the effect of decisions on your tax position, income and long-term plans.

Review your estate plan before the rules change again

If you own a business or farm, hold a significant pension or have not reviewed your estate plan recently, book a discovery meeting to understand which areas may need attention.

This article reflects the general rules available at the time of writing and does not constitute personalised tax, legal or financial advice. Tax treatment depends on individual circumstances and may change. Seek professional advice before acting.

Author  Matthew Walne, Certified Financial Planner, Chartered Fellow Financial Planning, Chartered Wealth Manager and Registered Life Planner. Managing Director of Santorini Financial Planning, with more than 27 years of experience helping families and business owners across Leicestershire and the East Midlands plan their estates.