New IHT rules risk 'dry' tax bills and future disputes for family businesses, warns Irwin Mitchell - London Business News | Londonlovesbusiness.com

"Many farming and business families still assume the enterprise will pass tax‑free but under the new cap, that won't always be true. Where shareholder or partnership agreements transfer the business to a co‑owner on death, the estate may carry the IHT bill even though the family doesn't inherit the asset. That's the classic 'dry' tax scenario - risks are avoidable with the right planning."

"Where a Will leaves a farming business to one part of the family and other cash assets to the non-farming family, the non-farmers could end up paying the IHT, reducing or extinguishing their part of the estate. This might give rise to an increase in will disputes in the coming years brought by disappointed beneficiaries who find themselves with a much smaller inheritance than expected."

Irwin Mitchell advises family businesses and farmers to urgently review wills and succession documents before April 2026 inheritance tax changes take effect. Agricultural Property Relief and Business Property Relief will be capped at £2.5 million combined per estate, with qualifying value above that threshold receiving only 50% relief instead of full exemption. A significant risk emerges where shareholder or partnership agreements transfer businesses to co-owners upon death, leaving estates with IHT liability despite families receiving no cash or assets—termed a 'dry' tax charge. Additionally, when wills distribute farming businesses to one family branch and cash assets to another, non-farming beneficiaries may bear the tax burden, substantially reducing their inheritance and potentially triggering disputes among disappointed heirs.

Read at London Business News | Londonlovesbusiness.com