Inheritance Tax planning is often associated with trusts, lifetime gifts, company structures and other technical arrangements. However, before considering more complex strategies, it is important to ensure that the basic foundations of an estate plan are properly in place.
One of the most important of these foundations is a valid and up to date will. For business owners, property investors and individuals with substantial estates, failing to deal with this basic step can create unnecessary complications for beneficiaries and undermine wider succession and tax planning.
(Reading Time: Approx. 6 minutes)
Topics Discussed:
- Why a properly drafted will should form the foundation of Inheritance Tax and succession planning.
- The current 2026/27 Inheritance Tax position and the importance of reviewing wills following changes to Business Relief and Agricultural Relief.
Starting With the Basics
Over the last 18 months, we have held a significant number of consultations with clients concerned about their potential exposure to Inheritance Tax. In many cases, those clients own substantial property portfolios, businesses, investments and other valuable assets, making their concerns entirely understandable.
However, one of the first questions that should be considered is whether there is a valid will in place. It is surprisingly common to find individuals considering sophisticated tax planning arrangements despite not having made adequate provision for what should happen to their assets on death.
This can represent a significant gap in the overall planning process. A person may spend considerable sums implementing trusts, making gifts or restructuring ownership, yet their family could still face unnecessary uncertainty if the will does not properly reflect those arrangements.
A professionally drafted will should therefore be viewed as an integral part of estate planning rather than simply an administrative document to be dealt with at a later stage.
The Inheritance Tax Position for 2026/27
The standard rate of Inheritance Tax remains 40% for the 2026/27 tax year. However, it is important to remember that the 40% rate does not automatically apply to the entire value of an estate.
The nil-rate band remains £325,000. In addition, the residence nil-rate band can provide a further allowance of up to £175,000 where the relevant conditions are satisfied, including where a qualifying residence is left to direct descendants.
This means that, in appropriate circumstances, an individual may have up to £500,000 available before Inheritance Tax becomes payable. Married couples and civil partners may also be able to transfer unused allowances to the surviving spouse or civil partner, subject to the applicable conditions.
The residence nil-rate band is reduced for estates valued above £2 million, which means that individuals with larger estates should not assume that the full allowance will necessarily be available. The correct Inheritance Tax position will therefore depend upon the value and nature of the estate, the assets held, the beneficiaries involved and the reliefs that may apply.
Changes Affecting Business Owners
The 2026/27 tax year is particularly important for business owners due to changes affecting Business Relief and Agricultural Relief from 6 April 2026. Under the current rules, 100% relief is generally available on the first £2.5 million of qualifying agricultural and business property. Qualifying value above the available allowance will generally benefit from relief at 50%, rather than 100%.
Unused allowance may also be transferable between spouses and civil partners in certain circumstances. As a result, some couples may potentially have access to a combined £5 million allowance for qualifying property, although the precise treatment will depend upon the facts of the case.
These changes make succession planning increasingly important for individuals who own valuable trading companies, partnerships or agricultural assets. Business owners who may previously have expected the full value of a qualifying business to receive 100% relief should therefore review both their tax position and their wills.
The will should also be considered alongside any shareholders’ agreement, partnership agreement or other business succession arrangements. Where these documents do not work together, the result can be uncertainty regarding who inherits shares, who controls the business and whether other shareholders have rights to acquire an interest following a death.
What Happens Without a Will
Where an individual dies without a valid will in England and Wales, their estate is distributed under the intestacy rules. This means that the law determines who is entitled to inherit rather than allowing the deceased person’s wishes to determine how the estate is distributed. The intestacy rules can produce results which differ significantly from what an individual may have intended. This can be particularly relevant for unmarried couples, blended families and individuals with complex business or property interests.
There may also be practical difficulties in administering the estate. Someone will need to obtain the necessary legal authority to deal with bank accounts, investments, properties, business shares and other assets, and delays can arise where there is uncertainty as to who should take responsibility.
For business owners, these problems can be particularly serious. A lack of clear succession arrangements may affect decision-making, access to company information and the future ownership of shares at a time when continuity is especially important.
A Will as Part of Wider Tax Planning
A will should not be viewed as a substitute for broader Inheritance Tax planning. Instead, it should operate alongside any lifetime planning that has already been undertaken or is being considered.
Lifetime gifts, trusts, changes in asset ownership and the availability of Business Relief or Agricultural Relief may all form part of an effective estate planning strategy. The seven-year rules relating to lifetime gifts may also be relevant where an individual is considering transferring assets during their lifetime. Care must also be taken where a person gives away an asset but continues to benefit from it. HMRC’s gift with reservation rules can result in an asset remaining within the person’s estate for Inheritance Tax purposes where the required conditions are not satisfied.
The important point is that each part of the plan should complement the others. A tax strategy may be technically effective during a person’s lifetime, but problems may still arise if their will has not been updated to reflect changes in asset ownership, family circumstances or business arrangements. For Muslim clients, estate planning can also take account of Sharia wishes while ensuring that the will remains properly drafted and legally effective under the law of England and Wales.
Keeping Your Will Under Review
Making a will should not be regarded as a one-off exercise. Changes in asset values, family circumstances, tax legislation and business ownership can all mean that an existing will no longer produces the intended result.
This is particularly relevant following the changes applying from the 6 April 2026 to Business Relief and Agricultural Relief. Individuals with valuable businesses or agricultural assets should consider whether their current will and wider estate planning remain suitable under the new rules.
A review may also be appropriate following marriage, divorce, the birth of children or grandchildren, the acquisition or disposal of a business, or a substantial change in the value of an estate.
Summary
Inheritance Tax planning can involve highly technical arrangements, but effective planning should begin with the fundamentals. A valid and properly drafted will provides clarity over who should administer an estate, who should inherit and how assets should pass following death.
If you are concerned about Inheritance Tax or would like to ensure that your estate planning is properly structured, get in touch with us at Tax Expert.
Our partnered Solicitors, Help Me Legal, have a Free Wills Month starting in October, providing an opportunity to review your arrangements and ensure you have an appropriate will in place. For more information, contact Saara at Help Me Legal on wecare@helpmelegal.uk.
Fill out our form here, email us at info@taxexpert.co.uk, or message us on our WhatsApp for out of office hours.
Kind regards,
Ilyas Patel
