Nobody in Whitehall is going to stand at a podium and announce “we’re putting your taxes up.” They don’t need to. This year’s tax year changes, rolling in from 6 April, do the job far more quietly: freeze a threshold here, shave a relief there, let eight years of inflation do the dirty work, and let ministers insist, with a completely straight face, that nothing has really changed. It has. You just won’t see it on the news, you’ll see it on the death certificate, the succession plan, and eventually the pension statement.
Start with inheritance tax, because this is the one that will hit hardest and quietest. From 6 April 2026, the 100% relief available under Business Property Relief and Agricultural Property Relief is capped at a combined £2.5 million per individual, after the government softened its original £1 million proposal following a farming backlash. Above that threshold, relief drops to 50%, meaning an effective 20% inheritance tax charge on the value of a family business or working farm that previously passed on tax-free. Shares listed on AIM, including EIS companies that happen to be AIM-quoted, take a harsher hit still: they move to a flat 50% relief regardless of value, and don’t get to use the £2.5 million allowance at all. Family firms that have been handed down for generations, often illiquid and impossible to sell quickly, are now expected to find a fifth of their value in cash to satisfy HMRC. Instalment payment terms have been extended, which is a mercy, but it does not change the fundamental shift: business succession in Britain now comes with a tax bill attached.
Start with inheritance tax, because this is the one that will hit hardest and quietest. From 6 April 2026, the 100% relief available under Business Property Relief and Agricultural Property Relief is capped at a combined £2.5 million per individual, after the government softened its original £1 million proposal following a farming backlash.
Above that threshold, relief drops to 50%, meaning an effective 20% inheritance tax charge on the value of a
family business or working farm that previously passed on tax-free. Shares listed on AIM, including EIS companies that happen to be AIM-quoted, take a harsher hit still: they move to a flat 50% relief regardless of
value, and don’t get to use the £2.5 million allowance at all. Family firms that have been handed down for generations, often illiquid and impossible to sell quickly, are now expected to find a fifth of their value in cash
to satisfy HMRC. Instalment payment terms have been extended, which is a mercy, but it does not change the fundamental shift: business succession in Britain now comes with a tax bill attached.
Then there is the pension change scheduled for April 2027 but already reshaping decisions now:
unused pension funds and death benefits will, for the first time, be drawn into the inheritance tax net. For decades, pensions were the one sensible place to leave money you didn’t need to spend, precisely because they sat outside your estate. That planning certainty has gone, and financial advisers up and down the country are now spending their client meetings unwinding strategies that were, until recently, entirely rational.
None of this is happening in a vacuum. The Bank of England has held the base rate at 3.75% through the summer, with inflation ticking back up to 2.9%, and a three-way split on the Monetary Policy Committee
suggesting there is no consensus on where rates go next.
A government raising the effective tax take through frozen thresholds and narrowed reliefs, at the same time as the cost of living refuses to fully settle, is not a government offering relief. It is a government banking on
the fact that fiscal drag is far less politically painful than raising a headline rate.
The case for all this, and it should be stated fairly, is that the public finances need repairing after a decade of borrowing, that the very largest estates and businesses can absorb a 20% charge on the value above £2.5 million, and that closing reliefs which had become vehicles for inheritance tax avoidance by the wealthy, AIM portfolios built purely to dodge the 40% rate, for instance, is a reasonable and overdue piece of tax policy. Supporters would also point out that £2.5 million is a considerable sum, well beyond what the vast majority of estates will ever hold, and that instalment payment terms genuinely soften the cash-flow shock for family businesses.
But the counter-argument matters too. Family businesses and farms are not bank accounts.
Their value is tied up in machinery, stock, land and premises, none of which can be sold off in a hurry without damaging the operation itself, and often without damaging the jobs that depend on it.A tax bill calculated on paper value but payable in real cash is precisely the kind of policy that looks reasonable in a Treasury spreadsheet and reckless on a farm balance sheet. The people best placed to navigate these changes, trust structures, lifetime gifting strategies, family investment companies, are the wealthy who can afford proper advice. The people worst placed are the moderately successful shopkeeper, the third-generation manufacturer, the farming family with more land than liquidity.
What should you actually do about it? If you run a business or hold agricultural property anywhere near the £2.5 million combined threshold, this is not a conversation to have in five years’ time. Lifetime gifting rules changed from Budget day 2024 onwards, so transfers made since then already interact with the new regime if death occurs after 6 April 2026. Review wills that were drafted on the old assumption of unlimited 100% relief, because many of them now under-provide for a tax bill that didn’t exist when they were written. And if your pension has become, in effect, an inheritance vehicle rather than a retirement income, that plan needs revisiting well before 2027 arrives, not in a panic the week before.
The broader lesson of this Budget cycle is one that recurs every year and is ignored every year: threshold freezes are tax rises wearing a disguise. Nobody has to stand up and announce a headline increase, because inflation and time do the work for them, quietly, in the background, while everyone’s attention is on the headline rate that never moved. It is, in its own way, a far more honest reflection of where this government’s priorities sit than any Budget speech will ever admit out loud.