Business Property Relief Reform: What 2026 Means for Your Legacy
- Ray Best
- Nov 27, 2025
- 3 min read
Updated: Dec 9, 2025
How Accountants Can Prepare Business Owners for the New Inheritance Tax Landscape
For many entrepreneurs, their business is more than an asset - it's the product of decades of work, risk, and commitment. Yet from April 2026, upcoming reforms to Business Property Relief (BPR) could see a significant portion of that hard-earned value exposed to inheritance tax (IHT).
While early headlines focus on restrictions, a closer look reveals new planning opportunities for those who act with foresight. For accountants advising high-net-worth business clients, this shift illustrates the value of proactive estate and succession planning.
Understanding the 2026 BPR Reforms
From 6 April 2026, the government intends to cap the 100% relief available under both Business Property Relief (BPR) and Agricultural Property Relief (APR):
The first £1 million of qualifying business assets will still receive 100% IHT relief.
Anything above that threshold will attract only 50% relief, meaning 20% tax on the excess.
However, the £1 million cap resets every 7 years, meaning well-advised business owners can still make use of multiple allowances through strategic lifetime planning.
Strategic Options for Business Owners - and How Accountants Can Guide Them
Retaining Ownership Under Death
For some business owners, it can still make sense to hold assets until death. This approach allows for:
Continued control and income (e.g., dividends).
Capital Gains Tax uplifts on death.
Potential for ongoing Business Relief on eligible assets.
However, from April 2026:
Only £1 million of assets will be fully exempt from inheritance tax.
Excess assets will attract a 20% Inheritance Tax (IHT) unless mitigated by the nil-rate band.
The £1 million cap cannot be transferred between spouses, which effectively doubles the exposure for couples.
Planning Tip: Accountants should consider restructuring their wills so that business assets are transferred directly to the next generation. In contrast, non-business assets are allocated to a spouse, thereby better utilising available relief.
Lifetime Gifting for Business Assets
Lifetime gifting remains one of the most powerful planning tools available under the new regime.
Gifts that survive for 7 years are fully exempt from Inheritance Tax (IHT).
Gifts made between October 2024 and April 2026 will still benefit from the new £1 million cap.
Gift relief may reduce tax exposure for gifts made 3 to 7 years before death.
Strategic Insight: Each 7-year cycle effectively resets the £1 million cap - giving accountants and planners multiple opportunities to use the relief across a client's lifetime.
Using Trusts to Combine Control and Tax Efficiency
Shifting assets into a discretionary trust allows clients to pass on value while retaining influence.
Trusts can receive up to £1 million (plus the nil-rate band) every 7 years without incurring immediate Inheritance Tax (IHT).
Starting in 2026, BPR assets held in trusts that exceed the threshold will incur a 6% charge every 10 years, or a 3% charge if only 50% relief is applicable.
Note: Creating multiple trusts will not increase allowances under the new regime. Proper timing and structure are essential to prevent unnecessary charges.
Mitigating Exposure Through Protection
In cases where large gifts or retained assets increase IHT risk, insurance solutions can help maintain flexibility:
Term assurance can cover the risk of failed PETs (Potentially Exempt Transfers).
Whole-of-Life cover, held in trust, can provide liquidity to cover future IHT liabilities.
Insight: This can be particularly valuable for family businesses that rely on retained earnings or whose ownership structure makes liquidity planning difficult.
Special Considerations for AIM and Business Relief Investments
AIM-listed shares will qualify for only 50% relief under the new rules.
Asset-backed Business Relief schemes may still apply but require enhanced due diligence.
Accountants should review their clients' existing investments to assess risk and liquidity and to determine whether diversification or restructuring may be appropriate.
Key Takeaways for Accountants
The £1 million cap resets every 7 years, which creates opportunities for ongoing lifetime planning.
Trusts remain viable options, but careful design is necessary to retain relief and avoid exposure to periodic charges.
Doing nothing may increase tax exposure - but in certain cases, a well-timed deferral can be beneficial.
Early action allows clients to maintain flexibility and ensures compliance with the reformed regime.
These changes signify a clear policy shift from broad-based exemptions to active, managed planning. Accountants who advise entrepreneurial clients should now review structures, update wills, and collaborate with estate planning specialists.
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