Higher Limits for key business reliefs..
..but unused pensions remain a target!
Good news for family farms and businesses: the government is raising the limits on Business and Agricultural Relief. This means more of your valuable assets can pass on without an inheritance tax (IHT) bill.
But don’t get too comfortable just yet. There’s another big change coming that could affect your financial legacy — unused pension pots will soon be caught in the inheritance tax net. That means it’s more important than ever to review your financial plans.
What’s Changing with Agricultural and Business Relief?
On 23 December 2025, the UK Government confirmed an update to the rules around Agricultural Relief and Business Relief. Starting 6 April 2026, the threshold for qualifying assets that get 100% relief from IHT is increasing from £1 million to £2.5 million.
Simply put: this means many more family farms and trading businesses can be passed on without facing an inheritance tax charge. It’s a great relief for those who want to keep their business in the family.
Watch Out for Inheritance Tax on Unused Pension Pots
Here’s the catch: from 6 April 2027, most unused pension funds and death benefits will count towards your estate for inheritance tax purposes.
Until now, pension pots left behind when you die generally escaped IHT, making them a popular way to preserve wealth for your loved ones. But under the new rules, these pension savings will be included in your estate’s value. If your total estate exceeds the available allowances, these funds could be taxed at 40%.
What Does This Mean for You?
This is a major change, so it’s worth thinking carefully about how your pension fits into your overall estate plan. You might want to:
– Reassess your pension alongside your other assets
– Consider trusts, gifts, or lifetime planning strategies
– Review your wills and beneficiary nominations to reflect these new tax rules
The Bottom Line
The recent boost to Agricultural and Business Relief is great news for many business owners and farmers. But the upcoming pension tax changes mean now’s the time to take a fresh look at your financial plans.
Talking to a professional adviser can help you understand what these changes mean for you and what steps to take before the new rules kick in.