Is today a good day to die?

While some might argue no day is a good day to die, it is commonly accepted that if we have to depart this mortal coil, then a good day might be a day when we are ready and prepared and have said all our goodbyes. But are we ever ready to expire from a tax perspective?

Roy Jenkins’ famous quotation about inheritance tax (IHT) being a voluntary levy posits that people would rather hold onto their cash and assets with cold dead hands, thereby gifting up to 40% to the taxman than give assets away during lifetime. And if your name is E. Scrooge prior to some supernatural nocturnal visits perhaps this is true, but in general there are two more pressing reasons why people leave IHT planning until it is sometimes too late. First, we don’t know when we are going to die and second, we live with the reality of death from birth, such that it never really feels a pressing need. Often until it is too late.

The recent changes to IHT, particularly affecting farmers and business owners, may be perceived as unfair and clumsy, and I couldn’t possibly comment on how I might have done things differently. However, what the changes have done, alongside significant media coverage of the outraged farmers, is bring IHT planning to the forefront of people’s minds.

If you are a business owner, you could have been forgiven for thinking that IHT planning was not really a priority, particularly if still at the coal face of running your business. Business assets benefitted from 100% relief from IHT so even if your other assets (e.g. your home) ended up paying some tax, the golden egg was protected. Alas, no more.

From April next year, only the first £1m per person will get IHT relief at 100%; the balance of qualifying business assets will get Business Property Relief (BPR) at 50%, meaning with a 40% IHT charge, the effective rate of tax on those assets is 20%. Though not a life changing amount (other than the fact that your life will have changed pretty dramatically if we are talking IHT on death), those businesses, or more specifically your heirs will have to find that cash from somewhere.

More importantly, the £1m limit refreshes every seven years, but is not transferable between spouses. This means that, even if you have a business worth significantly more than £1m, provided you have both sufficient children/preferred relatives and multiples of seven years, you can still achieve voluntary IHT status. You may also need to look at redrafting your Wills.

Of course, this does not take account of income requirements and the many other factors in IHT planning that really mean you should talk to a professional, but it does mean that, with sufficient notice and planning you can achieve a better IHT position, so long as you start thinking about it sooner rather than later. And more regularly.

This is great news for IHT advisers, and the side effect of all this media attention means that it isn’t only those people who are directly affected by the changes who are now seeing the benefit of thinking about things now.

But sometimes immediate action is crucial. The new rules on business and agricultural property take effect on 6 April 2026, and provided you are able to survive seven years, this means there is a narrow window in which some additional tax planning could be implemented, utilising the current unlimited 100% relief. While the tax tail should never wag the dog, if pre-sale planning is in point then surely it is worth considering whether taking early action might give a much better tax result, even if the sale is a little further down the road. Again, as there are a number of factors at play, the longer time you have consider your options before a hard deadline, the better. Even if a sale is not on the current horizon, using trusts to protect assets might still be the optimum position and if so, looking at it now under more favourable rules has to be a sensible choice.

While none of us can live forever, if we are planning on surviving beyond next April leaving business assets, we can make that day a better one by making it one for which we have prepared. At least in tax terms.