From 6 April 2026, the rules for Business Property Relief (BPR) will change. For many business owners this could alter how much of the business can be passed on free of Inheritance Tax (IHT).
BPR has long been one of the most valuable tax reliefs available to entrepreneurs, helping families pass down trading businesses without being forced to sell assets just to pay a 40% IHT bill.
The upcoming reforms do not abolish BPR, but they do introduce a cap and that means large estates and growing businesses will need to rethink their succession plans.
How Business Property Relief works today
Under current rules, many business owners enjoy 100% relief from IHT on qualifying assets. This can apply to:
- A business or an interest in a business (e.g. sole trader or partnership interest); or
- Shares in an unquoted trading company.
In some cases, 50% relief applies instead, typically where the asset is used in a business but owned separately or where the shareholding in a listed company that gives control.
To qualify, the business must be “wholly or mainly trading” (more than 50% of activities are trading rather than investment), and you must have owned the assets for at least two years before the transfer.
The changes – a BPR cap
The government’s stated aim is to protect smaller enterprises and family farms by ensuring they still get full relief on all their qualifying assets. For smaller businesses and estates (valuations under £2.5 million for combined BPR/APR assets), the rule change will not reduce relief.
However, any business owner or landowner who holds qualifying business or agricultural property over the value of £2.5 million may face a larger IHT bill.
From 6 April 2026, the new rules will be:
- £2.5 million limit for full relief:
The first £2.5 million of combined business and agricultural property will qualify for 100% relief. - 50% relief above £2.5 million:
Any value over the £2.5 million threshold will only receive 50% relief. This means assets above the cap are effectively taxed at up to 20 percent, rather than the standard 40 percent inheritance tax rate, assuming no other reliefs apply. - Combined cap for BPR and APR:
Business Property Relief and Agricultural Property Relief will share the same £2.5 million threshold. Previously, there was no combined monetary cap, and qualifying assets could receive full relief without a fixed limit. - Impact on lifetime gifts and trusts:
The threshold is expected to apply across certain lifetime transfers and where multiple trusts are created by the same person, they share the allowance. - Spousal transfer allowance:
The £2.5 million BPR cap is expected to apply per individual and may be transferred between spouses or civil partners. If qualifying assets pass to a surviving spouse or civil partner, any unused portion of the cap may be able to be carried forward. This means couples may be able to benefit from up to £5 million of assets qualifying for full relief on second death, subject to the rules in force at the time.
How it may affect you
Even if you are under the threshold today, you may not stay there.
- Business growth, property appreciation or acquiring new assets could push your estate over the £2.5 million limit before 2026.
- The combined BPR/APR cap means agricultural property owners who also run a trading business will hit the threshold faster.
Many businesses have succession plans built around keeping assets in the family. Once relief is reduced, successors may face a tax bill they cannot easily pay without selling part of the business or property.
Steps to take before April 2026 changes to Business Property Relief
- Get a professional valuation: Obtain an accurate, up-to-date assessment of your business and any agricultural property. This will highlight whether you are likely to exceed the £2.5 million threshold.
- Review succession planning and ownership structure: Look at your overall strategy for passing on your business. Consider whether spreading ownership among family members could help maximise use of multiple £2.5 million thresholds.
- Check trusts and gifts: Lifetime transfers and trusts may be caught by the new cap especially if you have created multiple trusts.
- Keep good records: Maintain clear evidence that your business meets the “wholly or mainly trading” test and that assets are used for qualifying purposes.
- Consider timing of transfers: Transferring assets before April 2026 could lock in the current 100% relief.
The changes to BPR will be manageable for some and costly for others but the sooner you understand your position, the more options you will have. Early, proactive planning with professional advice will help protect your business and your legacy.
Tees’ expert financial and wealth advisory team work hand in hand with our legal advisers to ensure a joined-up approach to achieving your desired outcomes. Get in touch with us today and we will help you understand the full picture.
Disclaimer: This material is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It should not be relied upon for accounting, legal, or tax advice or investment recommendations.
Tees is a trading name of Tees Financial Limited, which is authorised and regulated by the Financial Conduct Authority (FCA), registered number 211314. Tees Financial Limited is registered in England and Wales, company number 4342506.
Tees is also a trading name of Stanley Tee LLP, a Limited Liability Partnership registered in England and Wales (number OC327874), regulated by the Solicitors Regulation Authority (SRA number 464615).
