The £5 million estate planning advice opportunity

HM Treasury is not known for handing out Christmas gifts, but the press release published on 23 December brought some unexpected seasonal good cheer. The decision to raise the threshold for estates claiming 100% Agricultural Property Relief or Business Relief from £1 million to £2.5 million has the potential to raise a significant number of estates out of inheritance tax (IHT) altogether.

That welcome announcement came one month after the Autumn 2025 Budget confirmed that any unused portion of the 100% allowance for either relief will be transferable between spouses and civil partners, including cases where the first death occurred before 6 April 2026. Beyond the new £2.5 million threshold, the 50% rate of relief will apply, and any shares eligible for Business Relief listed on the Alternative Investment Market (AIM) will only be eligible for 50% relief, regardless of the amount owned.

Allowing transfers to spouses or civil partners brings these two IHT reliefs in line with the other IHT allowances, the nil-rate band and the residence nil-rate band. It also removes some of the uncertainty or complexity over whether they should be used for individual estate planning rather than on a joint basis.

Taken together, these two adjustments to the rules coming into force from April 2026 mean that from April 2026, a potential combined allowance of up to £5 million can be shared between spouses and civil partners in respect of Business Relief or Agricultural Property Relief. But it’s worth remembering that while Agricultural Property Relief is claimed on the agricultural value of land and buildings, Business Relief can have a much broader application. It applies to interests in actively trading companies, shares in qualifying trading businesses, and certain business assets. For financial advisers, this makes it an estate planning solution suitable for a significant number of clients. They don’t need to own their own qualifying business; they can instead own shares in an estate planning service where the underlying businesses are expected to qualify.

Here’s a hypothetical example of how a married couple could take advantage of the new combined £5 million allowance. Graeme and Carol Smith recently sold their printing business for £5 million. Both in their 70s, they already have significant pension assets and the sale proceeds are not needed to support their lifestyle. Ill health means they are keen to discuss estate planning, and would dearly like to leave “their legacy” – the proceeds from the business sale – to their three children.

Graeme and Carol’s financial adviser warns them what would happen if they left that £5 million legacy in the bank. If Graeme were to pass away first, Carol would inherit those assets, which would then form part of her estate. Upon Carol’s death, assuming the other IHT allowances are used up, the sale proceeds would be subject to IHT at 40%. An IHT bill of £2 million would shrink their legacy to £3 million.

A more effective estate planning alternative would be for the Smiths to invest £2.5 million each into an estate planning service that invests into companies expected to qualify for Business Relief.

Graeme and Carol’s adviser explains that an investment that qualifies for Business Relief may be higher-risk in nature, but they agree that is within their capacity for loss and meets their estate planning objectives at this stage of their lives. They also understand that either of them will be able to access or make withdrawals (subject to liquidity) from the investment should they need access to their capital at a later stage.

In our example, Graeme held the shares for at least two out of the last five years, and held them at death. However, if he died before the two-year qualification period was reached, his shares can still be passed to Carol without resetting the two-year holding period. Carol inherits her late husband’s estate, and upon her subsequent death, Carol’s estate can claim the combined Business Relief allowance. This means the entire £5 million is exempt from IHT, and both her and Graeme’s legacies can be passed on in full to their children.

This is just one example where clients can make use of the raised allowance for Business Relief at the 100% rate and combine transferable allowances to even greater effect. It’s always more enjoyable to talk to clients about solutions rather than problems, and the recent adjustments from HM Treasury have helped open the possibility of having far more constructive conversations about estate planning and IHT than were possible a few months ago.

Important information

The Triple Point Estate Planning Service places capital at risk. Tax treatment depends on the individual circumstances of each client and is subject to change. Tax relief depends on the companies we invest in maintaining their qualifying status. Triple Point does not provide investment or tax advice, and information in this article should not be construed as such.