Inheritance Tax Planning for Estates Over £2 Million: A UK Adviser’s Guide

• Your residence nil-rate band tapers away entirely once your estate reaches £2.35 million, losing £1 for every £2 above £2 million.
• From 6 April 2026, only the first £2.5 million of combined business and agricultural assets attracts 100% relief.
• The £2.5 million relief allowance and the RNRB taper threshold both transfer between spouses, unlike the flat annual gift exemption.
• Family investment companies increasingly replace trusts for large transfers above the allowance.
• Lifetime trusts remove assets from your estate but carry entry charges and ten-year periodic charges tied to the new allowance.
• A £5 million estate can face a very different bill depending on whether assets sit in a will, a trust, or a company.

Nil-rate band (NRB). The first £325,000 of your estate that passes free of inheritance tax, frozen under current policy.

Residence nil-rate band (RNRB). An additional £175,000 allowance when your main home passes to direct descendants.

Business Property Relief (BPR) and Agricultural Property Relief (APR). Reliefs under the Inheritance Tax Act 1984 on qualifying business or farming assets, sharing one £2.5 million allowance for 100% relief from 6 April 2026.

Family Investment Company (FIC). A private company holding investments or property, where you keep voting control while your children hold future growth.

Your residence nil-rate band reduces by £1 for every £2 your estate exceeds £2 million, disappearing entirely at £2.35 million. As of the 2026 to 2027 tax year, this taper applies before any other relief, so a home that once qualified for the full £175,000 can lose that relief through property growth alone.

An estate valued at £2.2 million loses £100,000 of residence nil-rate band. One valued at £2.35 million or above loses all £175,000, per Inheritance Tax Act 1984 rules and HMRC’s residence nil-rate band guidance. The taper is measured against your whole estate, so growth in property, pensions, or investments can push you over. The £2 million threshold is frozen until April 2031.

From 6 April 2026, the first £2.5 million of your combined qualifying business and agricultural assets receives 100% relief under the Inheritance Tax Act 1984. Anything above that receives 50% relief, an effective 20% rate. HMRC’s guidance confirms the allowance can transfer between spouses where the first spouse left their estate to the survivor and made no earlier gifts that would have qualified for 100% relief — in that case, a couple can shelter up to £5 million between them.

Shares on a “not listed” market, including AIM, receive 50% relief in all circumstances, with no access to the allowance. HMRC’s published analysis of the reform indicates that the great majority of estates claiming Business Property Relief or Agricultural Property Relief fall well under the new £2.5 million cap. Combining the £2.5 million relief allowance with the standard nil-rate bands, a couple could in principle shelter up to £5.65 million tax-free depending on their individual circumstances and allowances.

Three structures do most of the work above £2 million: lifetime trusts, family investment companies, and business relief.

Lifetime trusts. A gift into most trusts is a chargeable lifetime transfer, triggering a 20% charge above your nil-rate band, plus up to 6% every ten years on relevant property.

Although very useful for IHT planning, you are restricted by the amount of £325,000 per person every seven years, which limits how much can be removed from your estate this way without triggering a charge.

Family investment companies. Transferring assets above your allowance into trust can trigger that entry charge. A company can often receive a larger contribution without it, while you keep control through your share class.

These are very useful for high net worth clients but can be complex to run depending on the assets held.

Business relief structuring. Holding qualifying business or agricultural property directly, checking the two-year ownership condition, often uses the allowance most efficiently first.
Business Relief can also be accessed by investing in shares of qualifying unlisted or AIM-listed companies, but this carries real investment risk: such portfolios are often concentrated in a handful of small companies, any of which could fail. Whether that risk is right for you is a question for regulated investment advice, not tax planning — Bluebond does not provide this assessment directly and would refer you to our partner independent, FCA-authorised firm for it.

A married couple with a combined £5 million estate and a £2 million trading business could face inheritance tax of around £940,000 without further planning, once the residence nil-rate band has tapered away completely.

Take a £1.2 million home, a £2 million trading company qualifying for Business Property Relief, and £1.8 million in investments and cash. Past the £2.35 million cutoff, residence nil-rate band is £0. Combined nil-rate bands of £650,000 still apply. The £2 million in shares sits under the £2.5 million allowance, so it receives 100% relief. That leaves £3 million, less £650,000, giving a taxable estate of £2.35 million at 40%: £940,000.

Whether that figure falls with planning depends on which assets move, into what structure, and whether time limits are survived. Moving part of the portfolio into a company or trust ahead of time can remove future growth from the taxable estate. This is general information, not a projection.

High-net-worth clients often find that no single type of adviser can solve their Inheritance Tax problem alone. It takes coordinated financial planning, tax planning and legal planning to produce a plan that works.

Bluebond is unusual in how closely it coordinates that advice: our own tax specialists and the solicitors within our team work alongside an independent, FCA-authorised firm for any regulated financial advice you need, bringing it all together into one comprehensive plan.

The families we see get the emphasis backwards. They ask how to use this year’s £3,000 gift exemption, when the number that actually decides their bill is how their assets are held. A trading company one pound over the £2.5 million allowance faces a fundamentally different outcome to the same value split between direct ownership, a trust, and a company ahead of time. 19 out of 20 Bluebond clients legitimately pay zero inheritance tax. Above £2 million, that outcome is driven by structure far more than by the size of an annual gift.

1. Does your estate’s trajectory, including property growth, take you past the £2 million taper threshold?
2. Do your business and agricultural assets exceed the £2.5 million 100% relief allowance?
3. Would moving assets above that allowance into a trust trigger an immediate chargeable lifetime transfer charge?
4. Could a family investment company receive the same assets without that immediate charge?
5. Has the allowance and any unused nil-rate band been reviewed for transferability between spouses?
6. Has your plan been reviewed since the reliefs changed on 6 April 2026?

• Assuming the residence nil-rate band still applies once your estate passes £2.35 million. It does not.
• Treating the £3,000 annual gift exemption as meaningful planning at this size.
• Settling business or agricultural assets above £2.5 million into a trust without checking the entry charge first.
• Ignoring AIM shares in the relief calculation. They receive 50% relief only.
• Leaving unused nil-rate band or relief allowance unclaimed, rather than confirming transferability.

Estates above £2 million face a different set of rules to the ones most gifting guides describe. The residence nil-rate band taper, the £2.5 million relief allowance, and the choice between trusts and family investment companies interact with each other, not in isolation. How your assets are held, not how much you give away each year, is where the real planning happens.

Bluebond’s trust and family investment company planning service and Business Property Relief expertise cover these structures in practice. Bluebond’s free webinar explains how they apply, and the IHT Mitigation Plan sets out a personalised route through them for your estate.

Disclaimer. The information in this article is general in nature and does not constitute personal financial, tax, or legal advice. UK tax legislation changes frequently, and the specific application of any rule or strategy depends on individual circumstances. Figures, thresholds, and reliefs mentioned are correct as of the 2026 to 2027 tax year unless otherwise stated. Before acting on any information here, consult a qualified adviser who has reviewed your full situation. Bluebond Tax Planning provides tailored recommendations only under a signed client agreement, following a full review. Bluebond Tax Planning is not FCA authorised and is not an SRA-regulated law firm; any individual solicitors within the group are personally regulated by the SRA, and any FCA-regulated financial advice you need is provided by a separate, independent FCA-authorised firm.