Wealthy individuals potentially evaded £343 million in inheritance tax, HMRC suggests; understanding the guidelines to avoid tax evasion complications.
In a significant shift, changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) are set to take effect from April 2026, potentially impacting many estates across the UK.
BPR and APR Changes from April 2026
From April 6, 2026, the landscape of inheritance tax will alter substantially. Key changes include the introduction of a £1 million cap on the amount of qualifying business and agricultural property that can benefit from 100% BPR, with amounts exceeding this cap receiving only 50% relief. This means that an increased inheritance tax rate of 20% will be applicable on the excess, compared to the standard 40%. Additionally, AIM-listed shares, previously eligible for 100% BPR, will only receive 50% relief under the new rules. Details on APR changes are not yet extensively outlined, but it's noted that the reforms will increase Inheritance Tax liabilities for a small number of estates each year.
Impact on Inheritance Tax Collection
These changes are expected to result in more inheritance tax for the Treasury from estates that previously benefited significantly from BPR and APR. Around 2,000 estates in the UK are projected to pay more Inheritance Tax in 2026 to 2027, with up to 520 estates being affected by changes in agricultural property relief. Inheritance tax revenues are already projected to reach a record high of 9.1 billion in 2025 to 2026, with this trend of rising IHT revenues partly due to frozen tax thresholds and rising asset values.
April 2027 Specifics
No specific changes have been outlined for April 2027 in the available information. However, the reforms introduced in April 2026 are expected to continue impacting inheritance tax liabilities beyond that date.
HMRC Investigations and Penalties
The changes may lead to an increase in inheritance tax investigations, potentially resulting in disputes between taxpayers and HMRC. Failing to declare cash or other valuables in an inheritance tax form can be problematic during inheritance tax investigations. Deliberately undervaluing a residential property that is part of an estate is another concern for HMRC during inheritance tax investigations. Penalties for underpaid inheritance tax can reach up to 100% of the extra tax due, plus interest at a rate of 7.75% from the due date until payment. HMRC takes a very dim view of under-reporting inheritance tax and can impose heavy fines if such errors are discovered.
Advice for Taxpayers
Accurate reporting of all assets is the best way to avoid inheritance tax penalties. In separate guides, we discuss ways to avoid inheritance tax through gifts and other methods to reduce an IHT bill. It's crucial for taxpayers to be aware of these changes and to seek professional advice if necessary.
Conclusion
The changes to inheritance tax rules from April 2026 are expected to bring in more inheritance tax for the Treasury, with around 2,000 estates projected to pay more Inheritance Tax in 2026 to 2027. Taxpayers are advised to ensure accurate reporting of all assets and to seek professional advice if necessary.
[1] Source: Gov.uk [2] Source: The Telegraph [3] Source: The Guardian
- With the reforms to Business Property Relief (BPR) and Agricultural Property Relief (APR) taking effect from April 2026, individuals might need to reevaluate their financial plans, potentially adjusting their pensions and property investments to avoid unexpected inheritance tax liabilities.
- The projected increase in Inheritance Tax revenues, partially due to the changes in BPR and APR, could potentially impact businesses and estates across the UK, necessitating a closer examination of property portfolios and financial holdings.
