Business Property Relief from April 2026:
Business Property Relief from April 2026:
What Business Owners Need to Reconsider Before the Cap Takes Effect
Business Property Relief has shielded trading businesses from inheritance tax for forty years. From 6 April 2026, it changes shape. Here's what the reform actually does – and the planning conversations that are worth having now.
For four decades, Business Property Relief — BPR — has been one of the most powerful tools in UK estate planning. Trading businesses and qualifying shareholdings in unlisted companies have passed to the next generation free of inheritance tax, often without limit.
From 6 April 2026, that will change. Combined qualifying business and agricultural assets above £1 million per individual will receive only 50% relief — an effective IHT rate of 20% on the portion above the cap, rather than the 0% that applied before. For families with substantial trading businesses, this is the most significant change to business succession planning since BPR was introduced.
What's Actually Changing
A new combined £1 million allowance applies per individual across qualifying business and agricultural property. Up to this threshold, 100% relief continues. Above it, relief drops to 50%.
The allowance is per person, not per couple, and is not transferable between spouses. Where ownership is concentrated in one spouse — as in many family businesses — the family's combined relief is reduced compared to a more balanced structure.
A trading company valued at £3 million on death would generate an IHT charge on the £2 million above the cap, taxed at the effective 20% rate — a £400,000 liability where previously none existed.
AIM shares, which previously qualified for 100% BPR after two years, also see relief reduced to 50% from April 2026, regardless of the £1 million allowance.
Who This Affects Most
Owners of established trading businesses valued above £1 million. Families where business ownership is concentrated in one spouse. Owners approaching retirement or succession who had assumed the business would pass to children unburdened by tax. Holders of AIM portfolios assembled for IHT planning.
Questions Worth Answering
Is the ownership structure still optimal?
Where ownership is concentrated in one spouse, transferring shares to the other may make use of both £1 million allowances. Such transfers need to be genuine, properly documented, and made well before death.
Should lifetime gifting be brought forward?
Gifts of qualifying business assets made more than seven years before death fall entirely outside the estate. This requires careful sequencing with capital gains tax planning and with the donor's own financial security.
Does a trust have a role?
Settling qualifying business property into a discretionary trust can allow value to grow outside the estate while preserving family control — though the trust's own charges need to be weighed.
Has the shareholder agreement been reviewed?
Buy-sell and cross-option agreements drafted assuming full BPR may now need revisiting.
Is life cover an option?
For families who cannot or do not wish to transfer ownership in advance, life insurance written in trust to cover the projected IHT liability is the cleanest solution.
What Not To Do
Do not transfer business ownership hastily. Gifts of business shares carry consequences beyond IHT — CGT, loss of control, family dynamics that cannot easily be reversed.
Do not assume the business is worth what you think it is. The value used for BPR is the value at death, which may differ substantially from book value or owner estimation. A proper valuation, refreshed every few years, is the foundation of sensible BPR planning.
Where This Leaves Things
£1 million of qualifying business assets per individual still passes free of IHT. For smaller family businesses, that may be enough. For larger businesses, the planning conversation has genuinely changed — and the deadline is a prompt to look at the whole position together, not to react to one element in isolation.
Wills, Tax & Trusts Ltd. advises high-net-worth families, business owners, and professional advisers on estate planning, inheritance tax, and trust structures. A STEP-qualified practitioner leads every matter, and a partner reviews it before release. If the April 2026 changes have prompted questions about your business or a client's arrangements, we offer an initial conversation to scope what — if anything — needs to be reviewed.
