How do the 2026 and 2027 inheritance tax changes affect Family Investment Companies?
Two reforms are changing estate planning in the UK: relief for business and farming assets has been restricted from April 2026, and most unused pension funds will count towards the estate from April 2027. Both increase the value exposed to 40% inheritance tax, and both are driving interest in lifetime planning.
What changed for business and agricultural property relief in April 2026?
Previously, qualifying business and agricultural assets could pass free of inheritance tax without limit. From 6 April 2026, 100% relief applies only up to an allowance per individual, with 50% relief — an effective 20% tax rate — above it. The government raised the allowance from the originally announced £1 million to £2.5 million, and unused allowance can be transferred between spouses and civil partners. Tax on these assets can usually be paid in instalments over ten years.
How will pensions be taxed from April 2027?
Pensions have long been a favoured way to pass wealth on, because unused funds sat outside the estate. From 6 April 2027, most unused pension funds and death benefits will be included in the estate, and the pension scheme will usually be responsible for paying any tax. Income tax can also apply when beneficiaries draw funds where the member died after 75.
Where does a FIC fit after these changes?
- Families with business or farming assets above the allowance may look to pass value during lifetime, and a FIC is one vehicle for holding and growing non-qualifying wealth.
- Families who were relying on pensions to pass wealth may reconsider drawing pension income and gifting it, or investing surplus capital through a FIC.
- Gifts of FIC shares are potentially exempt transfers, so they leave the estate after seven years.
- Growth shares mean future increases in value accrue to the next generation from day one.
Frequently asked questions
From 6 April 2026, 100% relief applies up to a per-person allowance of £2.5 million across business and agricultural property, with 50% relief above it.
Yes. From 6 April 2027, most unused pension funds and death benefits will be included in the estate for inheritance tax.
No. A FIC does not change the relief rules, but it can help families plan lifetime transfers of other wealth and future growth.
Lifetime planning generally works best with time, because gifts take seven years to fall fully outside the estate. Take advice on your own position before acting.
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