Inheritance Tax Reliefs You May Be Missing, by a Wills and Probate Lawyer London
Inheritance Tax is rarely the first thing a family thinks about when making a Will. It becomes important later, often when property values have grown, a family business has become successful, or children live in different countries. By then, the choices made years earlier can matter a great deal.
We work with clients who have London homes, family businesses, investment portfolios, trusts and overseas assets. One estate may be straightforward. Another can look like a small map of the world. The useful question is not simply, 'Will IHT apply?' It is, 'Which reliefs, exemptions and planning choices actually fit my family and my assets?'
This 2026 guide explains the main areas people can miss. It is deliberately practical. We also flag a major change that took effect on 6 April 2026: the rules for Business Property Relief and Agricultural Property Relief are no longer the same as the older 100% relief model often quoted online. Current HMRC guidance says the combined 100% relief allowance is now £2.5 million, with qualifying value above that generally receiving 50% relief.
Start with the 2026 IHT allowances
For 2026 to 2028, the standard Nil-Rate Band remains £325,000. The Residence Nil-Rate Band remains £175,000, with its taper beginning when an estate exceeds £2 million. GOV.UK confirms these thresholds for the 2026 to 2027 and 2027 to 2028 tax years.
Allowance | 2026 position | Important condition |
Nil-Rate Band | £325,000 per person | Applies to the taxable estate subject to the normal IHT rules |
Residence Nil-Rate Band | £175,000 per person | Linked to a qualifying residence passing to direct descendants |
RNRB taper | Starts above £2 million | The allowance is reduced as the estate grows |
Spouse/civil partner exemption | Generally unlimited for qualifying UK spouses/civil partners | The precise rules depend on domicile and the circumstances of the transfer |
A qualifying estate can therefore have access to up to £500,000 of combined NRB and RNRB for one person, subject to the detailed conditions. A surviving spouse or civil partner may also benefit from transferable unused allowances. GOV.UK states that a qualifying surviving spouse or civil partner can potentially have up to £1 million of combined threshold.
The trap is assuming that every family gets the full amount. The residence band is not a general extra £175,000 for every estate. The home, the beneficiaries and the value of the estate all matter.
The residence nil-rate band is easy to lose
For many London families, the home is the biggest asset. That makes the RNRB worth checking carefully.
· Check that the property qualifies as a residence for the relief.
· Check who receives it under the Will or intestacy rules.
· Check the direct descendant requirement.
· Check the value of the whole estate against the £2 million taper threshold.
· Check whether a downsizing or sale of a former residence affects the calculation.
A Will that simply says, 'Everything to my family,' may not be enough to answer every tax question. The drafting needs to be read alongside the family's assets and intended beneficiaries.
Spouse exemption and transferable allowances
Transfers between qualifying spouses or civil partners are generally exempt from IHT. That can make the first death tax-efficient, but it does not mean the family's IHT problem has disappeared. Assets can accumulate in the survivor's estate.
Unused portions of the Nil-Rate Band and Residence Nil-Rate Band can, subject to the statutory rules, be transferred to a surviving spouse or civil partner. That is one reason old Wills and estate files should not simply be left in a drawer.
When we review an estate, we look at what happened on the first death, what allowances were used, what passed to the survivor and what evidence will be needed later.
Business Property Relief changed in 2026
This is an area where older online articles can now mislead. From 6 April 2026, the rules changed.
HMRC's current guidance says qualifying agricultural and business property can receive 100% relief up to a combined £2.5 million allowance. Qualifying value above that allowance generally receives 50% relief. Unused allowance can be transferred to a surviving spouse or civil partner, potentially increasing the combined allowance to £5 million.
There is another important change for certain shares traded on recognised exchanges but designated as 'not listed'. HMRC confirms that Business Property Relief for those shares is reduced to 50% in all circumstances.
2026 issue | What it means | Why review matters |
£2.5m combined 100% allowance | Qualifying business and agricultural property share the allowance | Large estates may now have a tax bill where older planning assumed unlimited 100% relief |
Excess qualifying value | Generally 50% relief above the allowance | Valuation and asset classification become more important |
Certain unlisted-market shares | 50% relief | Portfolio structure may need closer review |
Spousal transfer | Unused allowance can transfer | Couples may have more planning room |
Trading business or investment vehicle?
Business Relief has never been a blanket exemption for every company. The nature of the business matters. A trading enterprise can be treated very differently from a business whose main activity is holding investments.
This is particularly relevant to property-rich structures. A family may call something a property business, but the tax analysis is not decided by the label. The actual activities, assets and statutory conditions matter.
We therefore avoid promising BPR simply because shares are held in a company. The structure needs to be examined.
Agricultural Property Relief needs a fresh look
Farm owners also need to review older estate plans in light of the 2026 changes. APR can provide substantial relief on qualifying agricultural property, but the relief is subject to detailed conditions and the new combined allowance.
HMRC confirms that from 6 April 2026, the combined 100% APR and BPR allowance is £2.5 million, with excess qualifying value receiving 50% relief. citeturn0search10
· Agricultural land and pasture can fall within the relief where the statutory conditions are met.
· The agricultural value of the property matters, and development value can create a different tax result.
· Occupation and ownership history can affect qualification.
· Farming arrangements, tenancies and business structures should be reviewed rather than assumed.
For a farm with a London connection, or an international family with agricultural land abroad, the valuation and succession plan should be considered together.
Lifetime gifts: the seven-year rule is only part of the story
Giving assets away during life can reduce the value of an estate, but not every gift has the same IHT treatment.
A straightforward gift to another individual is generally a Potentially Exempt Transfer. If the donor survives seven years, the gift can fall outside the estate for IHT purposes. If death occurs within seven years, the gift may become chargeable under the rules.
GOV.UK confirms that gifts made within three years of death can be taxed at 40% where IHT is due, with taper relief applying to certain gifts made between three and seven years before death. Importantly, taper relief changes the tax rate on a chargeable gift. It does not simply erase the gift from the estate.
Years between gift and death | Tax rate shown by GOV.UK where taper applies |
0 to 3 | 40% |
3 to 4 | 32% |
4 to 5 | 24% |
5 to 6 | 16% |
6 to 7 | 8% |
7 or more | 0% |
The wider estate calculation still matters. A gift can use the available nil-rate band before IHT is calculated on later transfers.
The small exemptions people forget
Not every useful IHT exemption is a large one. Some are small, repeatable and easy to overlook.
· Annual exemption: £3,000 of gifts per tax year, with unused exemption capable of being carried forward for one tax year.
· Small gifts: gifts of up to £250 per person can qualify, subject to the conditions and the rule that another allowance has not already been used for that person.
· Wedding or civil partnership gifts: separate limits can apply depending on the relationship between donor and recipient.
· Normal expenditure out of income: regular gifts can be exempt where the statutory conditions are met.
GOV.UK confirms the £3,000 annual exemption, the £250 small-gift rule and separate wedding gift allowances.
Normal expenditure out of income can be especially valuable
This is one of the most useful areas to understand properly. There is no simple fixed pound limit for qualifying normal expenditure out of income.
HMRC guidance states that the exemption can apply where the expenditure is normal and habitual, is made from income rather than capital, and does not leave the donor without enough income to maintain their usual standard of living.
In practice, that can include regular support for a child, school or university costs, or other recurring family expenditure. The records matter. A pattern that looks clear to the family may be difficult to prove years later without bank statements, income records and a note of the donor's intention.
This is not a loophole to use casually. It is a statutory exemption with conditions.
Trusts: useful, but never a magic IHT box
Trust planning can help families control how assets are held and passed on. It can also create its own IHT charges and reporting duties. That is why a trust should be designed around the family's aims, not inserted simply because someone says trusts 'save tax'.
A discretionary trust can give trustees flexibility over distributions. An interest in possession structure can give a beneficiary a defined interest. Different trust types have different IHT consequences.
The 2026 BPR and APR changes also contain specific rules for trusts. HMRC confirms that the £2.5 million 100% relief allowance applies to relevant trust property as well, with the precise treatment depending on the trust and charge involved.
That is why trust planning needs both legal drafting and tax analysis.
International families need a wider estate map
A London home is not necessarily the only asset that matters. International clients may have a house in France, shares in an overseas company, a bank account abroad, a family business in another jurisdiction or a foreign Will.
The UK IHT rules for international individuals changed materially from 6 April 2025, including the move from the old domicile-based long-term framework to residence-based rules for many purposes. This makes old advice about 'non-dom' status particularly unsafe to recycle without checking the current position.
Cross-border planning can involve separate Wills for different jurisdictions, coordination with overseas lawyers, trust analysis, asset ownership and probate planning. A document can also need notarisation and legalisation before it is accepted abroad.
This is where our wider international practice matters. A Wills and Probate Lawyer London may be coordinating the succession plan while a Notary Central London handles documents that must be authenticated for overseas use. Where an overseas authority requires an Apostille, Apostille Central London support may form one part of the process.
A Will is not the same thing as an IHT plan
A Will says what should happen to your estate. An IHT plan asks a wider set of questions.
· What assets do you own?
· How are they owned?
· Who will inherit them?
· What allowances may be available?
· Have you made gifts during your lifetime?
· Do you own a business or agricultural property?
· Are trusts involved?
· Do you have overseas assets or beneficiaries?
· What evidence will your executors need?
The best planning often starts with an asset map, not a blank sheet of Will paper.
What we review in a private wealth and estate planning matter
Our approach is to understand the whole picture first. We then identify where the Will, ownership structure, lifetime gifts, trusts and international documents interact.
· Current Will and any earlier Wills.
· Property and other major assets.
· Business shares and partnership interests.
· Lifetime gifts and regular payments.
· Trusts and previous settlements.
· Family relationships and intended beneficiaries.
· Overseas assets, Wills and local succession rules.
· Evidence needed to support reliefs or exemptions.
The aim is not to manufacture an artificial tax saving. It is to make sensible use of reliefs that genuinely fit the family while keeping the succession plan workable.
Plan before the estate becomes urgent
Inheritance Tax planning works best when there is time to think. A family business can be restructured only with care. A gift may need years to fall outside an estate. A trust may need professional administration. Overseas assets may require another lawyer's input. None of these jobs should be left until an executor is already dealing with a death.
We help clients in Holborn and across Central London review Wills, estates, trusts and international succession issues. Our office at Fox Court, 14 Gray's Inn Road, is close to Chancery Lane and within practical reach of Farringdon, Soho and the City.
For families with overseas documents, we can also coordinate the notarial side where required, including documents that may later need an Apostille. For estate work, our focus is on making the legal structure understandable, evidence-based and workable for the people who will actually have to administer it.
Frequently asked questions
1. What is the main IHT allowance in 2026?
The Nil-Rate Band remains £325,000, with a £175,000 Residence Nil-Rate Band subject to its conditions and £2 million taper threshold.
2. Can a married couple pass £1 million free of IHT?
Potentially, if the relevant NRB and RNRB allowances and all qualifying conditions are met.
3. Has Business Property Relief changed in 2026?
Yes, the combined 100% APR/BPR allowance is now £2.5 million, with qualifying excess generally receiving 50% relief.
4. Does taper relief make a gift tax-free after three years?
No, taper relief can reduce the tax rate on a chargeable gift, but it does not automatically remove the gift from the IHT calculation.
5. Can regular gifts from income be exempt from IHT?
Yes, potentially, where they meet the normal expenditure out of income conditions and are properly supported by evidence.
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