News & Insights

UK Inheritance Tax – Changes to Business Relief in 2026

What is Business Property Relief (BPR)?

Business Property Relief (BPR) is designed to allow family-owned businesses to be passed down through generations without being broken up or sold to cover an inheritance tax bill. Currently, it can provide up to 100% relief on the value of a qualifying business or its assets.

However, significant changes are coming on 6 April 2026 that could affect your succession plans.

What is changing?

From April 2026, the government is introducing a cap on how much 100% relief you can claim.

Below are the key changes:

A £2.5 million cap per individual: You will only get 100% tax relief on the first £2.5 million of your qualifying business assets.

Above the cap: Any value above £2.5 million will only get 50% relief. This results in an effective Inheritance Tax rate of 20% on that excess amount.

Shares: Certain shares, including those in unquoted and AIM-listed companies, will only qualify for 50% relief, down from 100%

Trusts: The £2.5 million allowance will also apply to trusts. Trusts created before October 30, 2024, will retain individual allowances, but new trusts or those created after this date will share a single allowance.

Spouse and Partners: The good news is any unused relief allowances may be transferable between spouses or civil partners, allowing up to £5 million in combined relief.

Anti-Forestalling Provisions: Lifetime transfers made between October 30, 2024, and April 5, 2026, will be subject to the new rules if the donor dies within seven years of the transfer.

What does this mean for business owners?

If your business assets are worth more than £2.5 million, your estate could face a tax bill that wasn’t there before. Without proper planning, your family might be forced to sell parts of the business or take out loans just to pay the Inheritance Tax.

This is particularly important for owners of family businesses, unquoted companies, and those relying on AIM shares as part of their estate planning.

How to prepare before April 2026

While BPR is still a very useful tool, the new cap means you need to review your plans, especially if you own a higher-value business.

We recommend you:

Get a valuation: The first step is to understand the current value of your business and whether your estate is likely to exceed the new £2.5 million allowance.

Review your Will: Your existing Will may have been drafted based on the assumption of 100% relief. Ensure your current Will still does what you want it to do under the new rules.

Consider lifetime gifting: Transferring assets during your lifetime could be one way to reduce the value of your estate at death. However, be aware of “anti-forestalling” provisions. If you make a gift of qualifying property after 30 October 2024 and pass away within seven years, the new rules will apply when calculating the tax due on that gift.

Get in Touch

Planning early is the best way to protect your business and your family from unexpected costs. Contact one of Tax and Trust specialists today to see how we can help.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.