Inheritance tax is catching more estates in 2026, and two separate changes are driving that. The threshold at which tax kicks in has been frozen for years and will stay frozen until 2031, meaning rising property prices are quietly pulling more ordinary families into scope. At the same time, new rules on farming and business assets came into force in April, replacing unlimited relief with a capped system. Here are seven things executors need to know.
The Nil-Rate Band Has Been Frozen For Years, And That Matters Now
The standard inheritance tax threshold, known as the nil-rate band, sits at £325,000. It has not moved since 2009 and is now frozen until April 2031. By the time that freeze lifts, the threshold will have been static for 22 years.
The practical effect is that more estates are becoming liable for inheritance tax without the government having to raise the rate at all. As property prices rise, the value of ordinary estates increases, but the point at which tax kicks in does not. This is sometimes called fiscal drag.
For executors, it means an estate that would have fallen comfortably below the threshold a decade ago may now attract a tax bill, even if the deceased had no significant savings or investments beyond their home.
Couples Can Still Pass On Up To £1 Million Tax-Free
Married couples and civil partners are in a stronger position than many realise. By combining their allowances, a couple can pass on up to £1 million without any inheritance tax liability at all.
Each person has the standard nil-rate band of £325,000. On top of that, there is an additional allowance called the residence nil-rate band, worth £175,000 per person, which applies when a main home is left to direct descendants such as children or grandchildren. Combined across a couple, that adds up to £1 million.
There is an important caveat. The residence nil-rate band only applies if the property is passed to direct descendants. If the home is left to a sibling, a friend, or a charity, that extra £175,000 allowance disappears.
Executors should also be aware that any unused allowance from the first spouse to die can be transferred to the survivor, so the full £1 million is still available even if one partner died years earlier with a modest estate.
Both allowances are frozen until April 2031.
The Farming And Business Relief Cap Is Now Live
From 6 April 2026, the rules around inheritance tax relief for farming and business assets changed significantly. Previously, qualifying assets could attract 100% relief with no upper limit. That unlimited relief is gone.
In its place is a capped system. The first £2.5 million of combined qualifying assets still attracts 100% relief. Above that threshold, relief drops to 50%, which in practice means a 20% inheritance tax charge on the excess. That is half the standard 40% rate, but it is a meaningful bill where previously there was none.
The assets covered include agricultural land and property under Agricultural Property Relief, and trading business assets under Business Property Relief. AIM-listed shares, which many families hold as part of IHT planning strategies, are also affected.
For executors dealing with farming estates or family businesses, this is the most significant change of 2026.
Married Couples With Farms Or Businesses Can Shield Up To £5 Million
The £2.5 million cap on farming and business relief works similarly to the standard nil-rate band in one important respect: any unused portion can be transferred to a surviving spouse or civil partner.
In practice, this means a married couple can effectively shield up to £5 million of qualifying business or farming assets from inheritance tax altogether.
This is often overlooked, particularly where one spouse had little or no qualifying assets in their own name. The unused allowance does not disappear on the first death. It carries forward.
Executors should check whether a transferable allowance is available from a deceased spouse, even if that spouse died some years ago. Getting this wrong could mean the estate pays tax it was never liable for.
Asset-Rich Estates May Face A Cash Problem
A farm worth £4 million is not the same as £4 million in the bank. This is the liquidity problem that the new relief cap has brought into sharp focus for many farming families and business owners.
Where an estate exceeds the £2.5 million threshold, a 20% tax charge applies to the excess. That bill must be paid in cash. For estates where the value is tied up in land, property, or business assets, finding that cash without selling something can be extremely difficult.
Life insurance written in trust is the most common solution. A policy of sufficient value, held in trust rather than as part of the estate, can provide the cash needed to settle the tax bill without forcing a sale of land or business assets. Because it sits outside the estate, it does not attract inheritance tax itself.
Executors cannot arrange life insurance retrospectively. But where an estate is being administered and the problem is already live, instalment arrangements with HMRC may be available for certain asset types. It is worth taking professional advice early.
Valuations Are More Important Than Ever
With more estates falling into scope, and the new cap on farming and business relief creating a hard threshold at £2.5 million, the accuracy of asset valuations has never mattered more. Being wrong in either direction carries risk.
Undervalue an estate and HMRC may investigate, applying penalties on top of the tax owed. Overvalue it and the estate pays more tax than it should. For executors, an incorrect valuation is not just an administrative error. It can create personal liability.
This is particularly true for estates that sit close to a threshold. A farm or business valued just under £2.5 million faces a very different tax outcome to one valued just over it.
Professional probate valuations cover the full range of estate assets, from household contents and jewellery through to vehicles, art, and land. Services such as SwiftValues offer a tiered approach, starting with online assessments from £25 per item and scaling up to full in-person appraisals where needed. All reports are HMRC-compliant, which matters when a valuation is likely to face scrutiny.
For executors managing complex or high-value estates, getting an independent valuation is not optional. It is the foundation everything else is built on.
Lifetime Gifting And Trusts Are Worth Revisiting
Executors are focused on the estate in front of them, but many will find themselves in conversation with beneficiaries who are thinking about their own position. The 2026 changes make that conversation worth having.
The new cap on farming and business relief, combined with the prolonged threshold freeze, means that families who might previously have assumed they were outside IHT scope may no longer be. Earlier planning is now more valuable than it was.
Lifetime gifting is one of the most straightforward tools available. Assets given away more than seven years before death generally fall outside the estate for IHT purposes. Trusts can serve a similar function, particularly for business or farming assets where outright gifting is not practical.
Neither route is without complexity, and both require proper legal and financial advice. But for beneficiaries inheriting farms, businesses, or property in 2026, the question of how their own estate will be handled is a reasonable one to raise sooner rather than later.
Executors are not financial planners. But flagging that the landscape has changed, and that advice is worth seeking, is a practical service to the families they work with.
What To Do Next
These changes are live now. If you are administering an estate in 2026, the starting point is understanding which thresholds and reliefs apply, and making sure asset values are accurate. Everything else, from calculating the tax owed to deciding whether to sell or retain assets, flows from that.