Changes To Inheritance Tax in 2025 – What You Need to Know and Why You Should Act Now

Inheritance Tax (IHT) is in the news again — and not for the best reasons.

The Government is looking at some big changes that could affect how much tax your family might have to pay when you pass on your estate.

If you own a business, a farm, or valuable assets, these changes could mean a bigger tax bill for your heirs. Here’s a straightforward guide to what’s happening and what it might mean for you.

What’s Changing?

1. Limits on Relief for Businesses and Farms from April 2026

Currently, many farms and business assets can be passed on without paying any IHT because they qualify for Business Property Relief (BPR) or Agricultural Property Relief (APR).

From 6 April 2026, these reliefs will be limited:
• The first £1 million of qualifying assets will still get 100% relief (no inheritance tax).
• Anything valued above £1 million will only get 50% relief, meaning a 20% tax bill on the excess.

This is a big change for or business owners and farming families with high-value assets.

Impact on Farming Communities

Farmers have already been protesting about these changes. For some, it could mean selling land or other assets to pay the tax.

The Government says most estates won’t be forced into this, but the concern is real.

2. Possible Changes to the Seven-Year Gift Rule

Right now, if you give away assets and survive for seven years, they are normally free from IHT.
The Government is thinking about extending this period to 10 or even 14 years — or introducing a cap on the total gifts you can make tax-free in your lifetime.
This would make it harder to use lifetime gifting as a way of reducing IHT.

3. Possible Changes to the Taper Relief Period

Currently, taper relief can reduce the amount of inheritance tax (IHT) due on certain gifts if you survive more than three years after making them, with the tax rate gradually falling until the seven-year point when no IHT is payable. The Government is considering extending this taper period to 10 or even 14 years. This would mean that gifts made many years before death could still attract some IHT, limiting the benefit of making gifts early. For those relying on the current seven-year rule to pass wealth tax-free, this change could significantly affect estate planning strategies.

Why This Matters to You

These changes will affect:
• Business owners and farmers – Assets you thought were tax-free may no longer be.
• Anyone with a large estate – Gifting strategies might need to be reviewed.
• People using trusts – Trusts holding farms or businesses could face new IHT charges.

What You Should Do Now

• Review your will and estate plan – Make sure it still works under the new rules.
• Consider gifting sooner rather than later – If it’s safe and affordable to do so.
• Look at how your assets are owned – Restructuring now might save tax later.
• Stay informed – The rules aren’t final yet, but change is coming.

The Bottom Line

IHT is often called the UK’s “most hated tax” because it hits families at a difficult time and is in effect a tax on wealth that has already suffered tax when it was earned.

With these changes, it’s more important than ever to plan ahead. Acting early can make a big difference to what your loved ones inherit.

At RJP LLP, we can review your situation and help you take steps now to protect your estate from unnecessary tax. Contact us via partners@rjp.co.uk.