Inheritance Tax, Property and Family Offices: What Changed on 6 April 2026
From 6 April 2026, business property relief and agricultural property relief give 100% relief from inheritance tax only on the first £2.5 million of qualifying property per person, with 50% relief above that. Investment property, including let residential and commercial buildings, still does not qualify at all, because a business that mainly holds investments or deals in land is excluded. A genuine property development company can qualify.
For a family whose wealth sits in property, that one distinction, between holding property and developing it, shapes most of the planning. This guide explains the 2026 rules, where property sits within them, and the structures families use: holding companies, family investment companies and trusts.
The numbers in 2026
| Item | Amount | Status |
|---|---|---|
| Inheritance tax rate on death | 40% above the available nil-rate bands | Unchanged |
| Nil-rate band | £325,000 | Frozen to 5 April 2031 |
| Residence nil-rate band (home passing to direct descendants) | £175,000, tapered away above £2 million estates | Frozen to 5 April 2031 |
| 100% business and agricultural relief | First £2.5 million of combined qualifying property | From 6 April 2026 |
| Relief above the allowance | 50% | From 6 April 2026 |
| Unused allowance | Transferable to a surviving spouse or civil partner, so up to £5 million for a couple | From 6 April 2026 |
| Shares not listed on a recognised exchange, such as AIM | 50% relief | From 6 April 2026 |
The history matters for anyone who read about this in 2025. Budget 2025 confirmed a £1 million allowance. On 23 December 2025 the government raised it to £2.5 million, and that is the figure that took effect on 6 April 2026.
Investment property versus a property business
Business relief is not available for a business that, in the words of HMRC's guidance, "mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments". In practice:
- A portfolio of let property is an investment business. Shares in a company that owns it get no business relief, however actively it is managed.
- A property dealing business, buying and selling land without developing it, is excluded as well.
- A property development company can qualify. HMRC's valuation manual says the exclusion "does not deny relief" where land is acquired with a view to development and disposal, and most of the profit comes from the value added by the development itself. Profit from obtaining planning permission or a rise in land values does not count.
- Hybrids, such as a company that develops and also keeps some units to let, are tested on whether the business is wholly or mainly trading. Each company is judged on its own facts at the date of the transfer.
There are also timing conditions: the assets must normally have been owned for at least two years, and be used in the business.
A former housebuilder winding down and selling its land bank would not qualify, according to HMRC. The business has to be developing at the time.
The structures families use
Holding property personally
Simple, but the whole value is in the estate. Gifts of property are potentially exempt transfers that fall out of inheritance tax after seven years, but a gift of a home the donor keeps living in rent-free is caught by the gift with reservation rules. Capital gains tax can arise on a gift of property, because a gift is treated as a sale at market value.
A family investment company
A family investment company is an ordinary private company that holds investments, often property, with shares split between generations. Parents typically fund it, keep control through voting shares, and give the growth to children through other share classes. Income is taxed at corporation tax rates, and dividends when they are paid out. Gifts of shares are potentially exempt transfers, and because the company holds investments, its shares will not qualify for business relief. The appeal is control and the shifting of future growth, not an immediate exemption.
Trusts
Most lifetime trusts are "relevant property" trusts. Putting assets in above the available nil-rate band triggers an immediate 20% charge (40% if the settlor dies within seven years), and the trust then faces a charge at each ten-year anniversary and exit charges capped at 6%. Trusts are about control and protection more than tax savings.
Development through a trading company
Where a family genuinely develops, holding that activity in a trading company, separate from a let portfolio, keeps the trading company's shares in the best position for business relief. Mixing development and long-term letting in one company can push it into the investment category.
Residence: the 2025 change for international families
Since 6 April 2025 inheritance tax depends on long-term UK residence, not domicile. Someone UK resident for at least 10 of the previous 20 tax years has worldwide assets within UK inheritance tax, with a tail of up to 10 years after leaving. UK property is always within the tax, and since 6 April 2017 that includes UK homes held through overseas companies. Our guide for non-resident investors covers this in more detail.
Worked example
Illustrative example only, round numbers, single person, no lifetime gifts, nil-rate bands already used by other assets.
| Estate holds | Value | Relief | Taxable | Inheritance tax at 40% |
|---|---|---|---|---|
| Shares in a property development trading company | £4,000,000 | 100% on £2.5m, 50% on £1.5m | £750,000 | £300,000 |
| Shares in a company holding let property | £4,000,000 | None | £4,000,000 | £1,600,000 |
Same value, very different outcomes. The difference is whether the company builds and sells, or holds and lets.
Who qualifies, and the pitfalls
| Asset | Business relief? | Common pitfall |
|---|---|---|
| Let residential or commercial portfolio | No | Assuming active management makes it a business |
| Shares in a trading development company | Yes, if mainly trading and held two years | Company drifting into holding finished units to let |
| Land bank held for planning uplift | Usually no | Treating planning gain as development profit |
| Holiday lets and serviced accommodation | Case by case | Assuming they count as trading |
| AIM-listed property companies | 50% where they qualify | Expecting 100% relief |
| Shares in a family investment company | No | Expecting the company itself to remove inheritance tax |
Where Craftex fits
We are a development and construction partner, so the question we can help with is the practical one: whether a scheme is a genuine development, how it is run and how it is recorded. We act as a property development partner from site to sale. A family office that funds or co-invests in a scheme we deliver through our development management service gets programme, cost and decision records that show what was built and what value it added. Our guide to family office property development in London explains the routes, from direct development to joint ventures, and our land value uplift and planning gain work covers sites held for consent. For a fuller picture of how we work with investors, see the free Investor & Developer guide.
