Inheritance tax and probate: What’s changed for property in 2026
Inheritance tax rarely generates headlines when nothing changes, but 2026 has brought the most significant shift to the IHT framework in a generation for certain types of property owner, alongside further confirmation that the frozen thresholds are drawing a growing number of ordinary homeowners into scope. For anyone selling or planning to sell an inherited property or thinking about the IHT implications of their own estate, understanding precisely what has changed and what has not is the most useful starting point.

The thresholds: frozen further and drawing more estates in
The fundamental IHT calculation has not changed. The standard nil rate band, which represents the amount an individual estate can pass on free of inheritance tax, remains £325,000 per person. This figure has not changed since the 2009/10 tax year. The residence nil rate band, an additional allowance of up to £175,000 available where a qualifying home is left to direct descendants, has also remained unchanged.

Combined, these allowances allow an individual estate a maximum of £500,000 free of IHT where a qualifying property is involved, or up to £1 million for a married couple or civil partners who pass their unused allowances to a surviving spouse. Estates valued above these thresholds are liable to IHT at 40% on the excess, with a reduced rate of 36% where at least 10% of the estate is left to charity.

Both the nil rate band and the residence nil rate band are now frozen until 5 April 2031, a year further than previously confirmed. The residence nil rate band itself begins to taper away where the total estate value exceeds £2 million, reducing by £1 for every £2 above that threshold. The practical consequence of the extended freeze is that rising property values continue to draw more homeowners into IHT scope without any change to the rate or headline figure.

The business and agricultural property relief cap: in force since 6 April 2026
The change that has materially altered the IHT position for landowners, farmers, and business owners took effect on 6 April 2026. Business Property Relief and Agricultural Property Relief, which previously provided 100% relief from IHT with no upper limit, are now subject to a combined cap of £2.5 million per individual at the 100% rate. Any unused allowance can be transferred to a surviving spouse or civil partner, so a couple can pass on up to £5 million of qualifying assets with full relief.

On qualifying business or agricultural assets above that £2.5 million combined threshold, relief falls to 50%, producing an effective IHT rate of 20% on the excess rather than the standard 40%. First announced in the Autumn Budget 2024 with a £1 million cap, later raised to £2.5 million, this change is now in force and applies to estates where the deceased held qualifying farmland, woodland, or business property.

For sellers who have inherited agricultural land or a farming business, or who are selling property that formed part of such an estate, the change is directly relevant to the IHT position of that estate. It does not affect the sale of ordinary residential property.

The pension change: confirmed for April 2027, not yet in force
From 6 April 2027, most unused defined contribution pension funds will fall within the scope of inheritance tax. Currently, pension pots are generally outside the IHT estate, making them a commonly used tool in estate planning. From April 2027 they will in most cases be treated as part of the estate on death.

HMRC estimates that this change will cause approximately 10,500 estates per year to pay inheritance tax for the first time and that around 38,500 estates will face a higher IHT bill than under current rules. This change is not yet in force but represents the most significant pending shift in the IHT landscape for many individual estates.

The probate process in 2026
Where Form IHT400 is required, it must be sent to HMRC first, and executors usually need to wait 20 working days before applying for probate.

Probate costs have also changed this year. Since 13 July 2026, the application fee for estates over £5,000 has been £526, up from £300. Copies of the grant cost £2 each when ordered with the application, or £16 each if ordered later, so it is worth ordering enough at the outset.

The majority of straightforward estates in which no IHT is payable qualify as excepted estates and follow a simpler process. Where an estate includes a property that, together with other assets, takes the total above the available nil rate band and residence nil rate band, the full IHT calculation and Form IHT400 will be required.

For anyone selling an inherited property, it helps to understand the timeline early. Any inheritance tax due usually has to be paid before probate is granted, although tax on property can normally be paid in instalments over ten years. A sale can be agreed before the grant is issued, but it cannot complete until probate is in place, so marketing can begin while the paperwork progresses.

This article reflects the position at the time of writing, ahead of the Autumn Budget.

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