For decades, Business Property Relief and Agricultural Property Relief have been among the most powerful tools in the UK inheritance tax planning toolkit. They allowed the owners of qualifying trading businesses and working farms to pass those assets to the next generation free of inheritance tax, no matter how large the business had grown. The logic was sound: preventing the forced sale of a viable business or a working farm simply to fund a tax bill on death.

From 6 April 2026 that changes fundamentally. The government is introducing a cap on the value of business and agricultural assets that can benefit from 100% relief. Above that cap, a reduced rate of relief applies, creating an effective inheritance tax charge of 20% on business and farm assets that were previously fully protected.

For owners of family businesses, farms, and AIM share portfolios, this is one of the most significant inheritance tax changes in a generation. At CoreAcc Accountants, we have been working with clients since the Budget announcement to review their estates and succession plans in light of the new regime. This guide explains everything you need to know — what the new rules are, who is most affected, and what can still be done before 6 April 2026.

Disclaimer: This article is for general information only and does not constitute legal or financial advice. Inheritance tax and succession planning are highly individual matters. Always seek specific professional advice for your circumstances.

1. What BPR and APR Were — and Why They Mattered

Before explaining what is changing, it is worth being precise about what these reliefs are and who has been relying on them.

Business Property Relief was introduced in 1976 and provides relief from inheritance tax on the transfer, either on death or as a lifetime gift, of certain qualifying business assets. The relief reduces the value of the asset for IHT purposes. At 100% relief, the asset is effectively removed from the estate entirely. At 50% relief, half its value is excluded.

Agricultural Property Relief operates on the same principle but applies specifically to agricultural property, farmland, farm buildings, and in some cases farmhouses, used for the purposes of agriculture. As with BPR, the relief can be 100% or 50% depending on the nature of the property and the ownership arrangement.

The assets that have historically qualified for 100% BPR include sole trader businesses, interests in trading partnerships, shares in unquoted trading companies, shares listed on qualifying markets such as the AIM market of the London Stock Exchange, and certain types of let business property. Assets qualifying for 50% BPR include controlling interests in quoted companies and certain business property let to a partnership in which the deceased was a partner.

100% APR has historically applied to owner occupied farmland and buildings, and to tenanted farmland where the owner has the right to vacant possession within 12 months or, for agricultural tenancies granted before August 1995, where the land has been held for at least seven years.

The common thread is that both reliefs were unlimited in their scope. A business worth £10 million could pass entirely free of inheritance tax. A farming estate worth £20 million could be transferred with no tax charge. The only conditions were that the asset had been held for the qualifying period and that it genuinely met the qualifying conditions.

2. What Changes from 6 April 2026

The October 2024 Autumn Budget announced, and subsequent legislation has confirmed, the following changes taking effect for deaths occurring on or after 6 April 2026, and for certain lifetime gifts.

The combined value of qualifying BPR and APR assets that can benefit from 100% relief is capped at £2.5 million per person. Above this combined threshold, the relief reduces to 50%, meaning that the effective inheritance tax rate on the excess is 20% (50% of the standard 40% IHT rate).

The £2.5 million cap is a combined cap across both reliefs. A business owner who also owns a farm does not get a separate £2.5 million for the business and another £2.5 million for the farm, the cap applies to the total value of all qualifying BPR and APR assets combined.

The relief above the cap is still available at 50%. This means that a business worth £5 million benefits from 100% relief on the first £2.5 million and 50% relief on the remaining £2.5 million. The IHT charge on the second £2.5 million is 20% of £2.5 million, which is £500,000. A business worth £10 million generates an IHT liability of 20% of £7.5 million, which is £1.5 million.

Before the April 2026 changes, both of those businesses would have passed completely free of inheritance tax.

3. Who Is Most Affected

The £2.5 million threshold sounds generous, but it captures a much larger group of business owners than the government's framing as a measure affecting only the wealthiest might suggest.

A trading business with modest but profitable turnover can easily reach a value of £2.5 million or above. A single property trading company or construction business generating £1 million of annual profit, valued on a multiple of earnings, would typically be worth between £3 million and £5 million. A farm of moderate size, 300 acres at average agricultural land values, can comfortably exceed the cap.

The AIM share portfolio holder is another significant affected group. AIM shares have been a popular inheritance tax planning vehicle precisely because they qualify for 100% BPR after two years of ownership, providing a liquid and accessible route to IHT exemption that does not require locking assets into an illiquid business structure. Portfolios of AIM shares specifically chosen for BPR qualification are now subject to the same £2.5 million combined cap as any other qualifying business property.

Directors and shareholders of long established family businesses who have not revisited their succession planning in recent years are particularly at risk. A business that was worth £1.5 million a decade ago may now be worth £4 million or more following growth and inflation. If the succession plan was designed when BPR was unlimited, it no longer provides the protection the business owner assumed it did.

4. The Spouse Transfer: The £5 Million Combined Shield

One important element of the final legislation is that the £2.5 million cap is transferable between spouses and civil partners, in the same way as the standard nil rate band.

If one spouse dies and their estate includes qualifying BPR or APR assets, any unused portion of their £2.5 million cap can be transferred to the surviving spouse and added to that spouse's own cap. A couple who both own shares in a family business, or both have qualifying interests in a farm, can therefore potentially shelter up to £5 million of qualifying business or agricultural property at 100% relief, provided the transfer is correctly structured in their wills and the qualifying conditions are met.

This makes the way that business ownership is structured between spouses significantly more important than it was before. A business owned entirely by one spouse loses half the potential cap, only £2.5 million can be sheltered for the couple rather than £5 million. Restructuring ownership to give each spouse a genuine economic interest in the business, with appropriate minority discounts considered in the valuation, can double the effective threshold.

This restructuring must be done carefully and with proper legal and tax advice. HMRC will scrutinise arrangements made shortly before death where the primary purpose appears to be accessing an additional cap. Transfers of business interests between spouses are exempt from capital gains tax and inheritance tax between spouses, making them relatively straightforward to implement during lifetime, but the timing relative to the April 2026 changes means there are now only 31 days in which to complete any restructuring that will apply under the new rules from the outset.

5. The Seven Year Rule and Lifetime Gifts

The April 2026 changes do not affect only deaths. They also affect lifetime gifts of qualifying business and agricultural assets.

When a business owner gives away qualifying business property during their lifetime, that gift benefits from BPR at the time it is made, the transfer is treated as a potentially exempt transfer, meaning no IHT is due at the time of the gift, and provided the donor survives for seven years the gift falls entirely outside the estate.

However, if the donor dies within seven years of making the gift, the gift is a failed potentially exempt transfer and is brought back into the estate for IHT purposes. The relief that applies to a failed gift is assessed under the rules in force at the date of death, not the rules at the date of the gift.

This means that someone who gave away business shares worth £4 million before April 2026 and then dies after April 2026 within the seven year window will have that gift assessed against the new capped rules. The first £2.5 million benefits from 100% BPR; the remaining £1.5 million benefits from only 50% BPR, creating an IHT charge of 20% of £1.5 million, which is £300,000.

This is a significant change for those who have been using lifetime gifting as part of a succession plan. Gifts made before April 2026 are not grandfathered under the old unlimited rules if the donor dies after that date.

On the positive side, the £2.5 million allowance for lifetime gifts refreshes on a seven year cycle. A business owner who makes a qualifying gift of £2.5 million of business property today and survives seven years can then make another qualifying gift of up to £2.5 million under 100% relief. Over a longer planning horizon, this rolling refreshment can allow substantial amounts of business value to be transferred free of tax through a structured programme of lifetime gifts.

6. The Interaction With Other Nil Rate Bands

BPR and APR do not operate in isolation. They sit alongside the standard nil rate band, the residence nil rate band, and the transferable nil rate band, each of which has its own rules, thresholds, and conditions. Understanding how these interact is essential for accurate estate planning.

The standard nil rate band is £325,000 per person. The residence nil rate band of £175,000 applies where a main residence is left to direct descendants. Both are transferable between spouses on the first death, giving a potential combined threshold of £1 million for a married couple where the full residence nil rate band is available.

BPR and APR sit on top of these thresholds, not inside them. The optimal planning sequence is therefore to first allocate the nil rate bands to assets that do not qualify for BPR or APR. the family home, cash savings, investment property, and then apply BPR or APR to the qualifying business and agricultural assets. Leaving the family home to a spouse on first death, using the spousal exemption, and then combining both nil rate bands on second death alongside the combined £5 million BPR cap can protect a very substantial estate from IHT.

Worked Example 1: A Family Business and the New Cap

David and Sarah own a manufacturing business valued at £6 million. They hold equal shares, so each holds £3 million of business assets. Both will from 6 April 2026 need to consider the following IHT position on death.

If David dies first with his £3 million of shares, the position under the new rules is: 100% BPR on the first £2.5 million, 50% BPR on the remaining £500,000. The IHT charge on the £500,000 at 50% BPR is 20% of £500,000, which is £100,000. David's unused BPR cap of £2 million can be transferred to Sarah on his death.

If Sarah later dies holding her own £3 million of shares plus any shares inherited from David, she has her own £2.5 million BPR cap plus David's transferred unused cap of £2 million, giving her a combined cap of £4.5 million. If she holds £3 million of shares at that point, the full amount is within her available cap at 100% BPR — no IHT charge on the business assets.

The difference between this optimised position and one where the couple did not restructure ownership or update their wills could be measured in hundreds of thousands of pounds of IHT avoided.

Worked Example 2: A Farm Exceeding the Cap

The Hartley family farm covers 380 acres in Hertfordshire, valued at £7.6 million. The farm is owned entirely by Mr Hartley senior, aged 72, who has been farming for 45 years. He has no spouse.

Under the old rules, the entire farm would have passed to his children free of IHT under 100% APR. Under the new rules: 100% APR on the first £2.5 million, 50% APR on the remaining £5.1 million. IHT at 20% on £5.1 million is £1,020,000.

Mr Hartley's estate will owe HMRC just over £1 million — a bill that has no precedent in his family's history of farming this land and that raises immediate questions about whether the farm can continue to be run as a viable enterprise without asset sales.

The 10 year instalment option (see section 8 below) means this does not need to be paid in a lump sum on death. But it remains a fundamental change to the economics of farm succession planning that requires urgent review.

Worked Example 3: An AIM Share Portfolio

Mrs Patel holds an AIM share portfolio of £4.2 million, assembled over the past decade specifically to qualify for BPR after two years of ownership. She has no other qualifying business or agricultural assets.

Under the old rules: the full £4.2 million would have been free of IHT.

Under the new rules from 6 April 2026: 100% BPR on the first £2.5 million, 50% BPR on the remaining £1.7 million. IHT at 20% on £1.7 million is £340,000.

If Mrs Patel also has a standard nil rate band of £325,000 available, her estate benefits from that separately against assets outside the BPR regime. The AIM portfolio excess above the cap of £1.7 million generates a £340,000 IHT bill that simply did not exist before April 2026.

7. What Still Qualifies — and What Does Not

The April 2026 changes affect the amount of relief available, not the qualifying conditions. The same assets that qualified for 100% BPR before the changes continue to qualify — they now qualify for 100% BPR only on the first £2.5 million of combined qualifying assets, and 50% BPR on the excess.

Assets that qualify for BPR continue to include interests in a sole trader business carried on for gain, interests in a trading partnership, unquoted shares in a qualifying trading company, and shares quoted on AIM where the company's business qualifies as a trading business. Shares in a company whose business consists wholly or mainly of making or holding investments — typically property holding or investment companies — do not qualify for BPR.

The distinction between trading and investment is a perennial source of dispute with HMRC. A company that owns and lets commercial property is likely to be treated as an investment company, with no BPR available. A company that provides services from property it also owns may be treated as a trading company with BPR available on the whole business, including the property element. Where a business has both trading and investment elements, HMRC applies a "mainly trading" test — broadly, if more than 50% of the business by assets, income, or activity is investment activity, BPR is denied in full.

For agricultural property, the qualifying conditions remain that the property must be agricultural property situated in the UK, the Channel Islands, or the Isle of Man; that it has been occupied for the purposes of agriculture throughout the two years before the transfer; or that it has been owned throughout the seven years before the transfer where it was occupied by someone other than the owner. The April 2026 changes do not affect these conditions.

8. Paying the Tax: The 10 Year Instalment Option

Where an IHT charge arises on business or agricultural assets in an estate, the legislation provides that the tax can be paid in equal instalments over a period of 10 years rather than as a lump sum. This option is available where the relevant assets are shares in a company that is not quoted on a recognised stock exchange, a business or interest in a business, or land.

The instalment option is valuable because the death of a business owner or farmer frequently does not generate a large cash legacy from which to pay a tax bill. The business or farm continues to operate; the tax is owed by the estate; and the only way to fund a lump sum payment may be to sell assets that the family wants to retain.

Under the instalment option, the estate pays one tenth of the IHT liability in each of the 10 years following the grant of probate. The government has confirmed that these instalments are interest free for qualifying business property — a meaningful concession given current interest rates.

The 10 year instalment plan does not eliminate the tax; it spreads it. A farm generating an IHT charge of £1 million under the new rules would make 10 annual payments of £100,000. For a viable farm generating sufficient income to service this, the burden is manageable. For a marginal farm or one that was already carrying debt, it may still create existential pressure.

The interaction between the instalment option and any lifetime planning undertaken before death is important. Where the estate can demonstrate that the tax arises from genuinely illiquid business or agricultural assets, the instalment option is available as of right. It does not require HMRC's approval.

9. Planning Before 6 April 2026: What You Can Still Do

This article is published on 6 March 2026 — 31 days before the new rules take effect. The window for planning under the existing unlimited BPR and APR regime is closing, but it has not closed yet.

The actions most worth considering in the next 31 days depend on individual circumstances, but the following are the most commonly applicable.

Making lifetime gifts of qualifying business or agricultural assets before 6 April 2026 allows those gifts to be assessed under the old unlimited rules if the donor survives seven years. If the donor dies within seven years and after April 2026, the failed gift is assessed under the new capped rules — but if they survive seven years, the gift is fully outside the estate regardless of value. Given the seven year horizon, this is a significant planning decision that requires careful consideration of health, family dynamics, and the operational implications of transferring ownership before management is ready to change.

Restructuring business ownership between spouses before April 2026 to equalise interests and maximise the combined £5 million BPR and APR cap. Transfers between spouses are exempt from CGT and IHT, making them a relatively clean restructuring tool — but they must be genuine transfers of economic interest, properly documented and reflected in shareholder agreements and company records.

Reviewing and updating wills to ensure they are structured to make optimal use of the new BPR and APR caps, the spousal transfer provisions, and the standard nil rate bands. A will written before October 2024 may assume unlimited BPR and APR and structure the estate accordingly. Those assumptions are no longer valid.

Considering a life assurance policy written in trust to fund an anticipated IHT liability. Where the estate has a known and quantifiable IHT exposure — for example, the £1,020,000 charge on Mr Hartley's farm in Worked Example 2 — a whole of life policy written in trust can provide the funds to meet that liability without requiring the estate to sell business or agricultural assets. The policy proceeds sit outside the estate and are not themselves subject to IHT.

Obtaining a current valuation of the business or agricultural property. The threshold of £2.5 million and its significance depends entirely on the value of the qualifying assets. Business valuations can be contentious — HMRC often applies a discount to minority shareholdings, and the choice of earnings multiple has a significant impact on the outcome. Knowing where you stand relative to the cap is the foundation of any succession plan.

10. Trusts and the New Rules

Many business owners hold their qualifying business or agricultural assets in trust — either a discretionary trust or a life interest trust — rather than personally. The April 2026 changes have specific implications for trust held assets that are worth understanding.

For a discretionary trust holding qualifying BPR or APR assets, the periodic charge that arises every 10 years is calculated on the value of the trust assets above the trust's available nil rate band. Under the old rules, BPR or APR assets were effectively excluded from the periodic charge calculation because they attracted 100% relief. Under the new rules, the excess above the £2.5 million cap is subject to an effective 6% charge on the 50% reduced value — meaning an effective periodic charge rate of approximately 3% on the excess value every 10 years.

For assets held in an interest in possession trust — where a beneficiary has the right to income during their lifetime — the position on the death of the life tenant is that the trust assets are treated as part of the life tenant's estate for IHT purposes. The £2.5 million BPR or APR cap therefore applies in the same way as it would if the assets were held personally.

Trustee meetings should review the trust's investment policy and succession plans in light of these changes. Where the trust holds a mix of qualifying and disqualifying assets, the allocation of the £2.5 million cap between them requires careful thought.

Frequently Asked Questions

What is Business Property Relief and who qualifies for it?

Business Property Relief is a relief from inheritance tax available on the transfer of qualifying business assets, either on death or as a lifetime gift. Qualifying assets include sole trader businesses, interests in trading partnerships, shares in unquoted trading companies, and AIM listed shares in qualifying trading companies. The company or business must be a trading business — one that does not consist mainly of making or holding investments. The asset must normally have been owned for at least two years before the transfer. From 6 April 2026, 100% BPR is available on the first £2.5 million of qualifying assets per person, and 50% BPR on the excess.

What is Agricultural Property Relief and how does it differ from BPR?

Agricultural Property Relief is a similar relief that applies specifically to agricultural property — farmland, farm buildings, and in some cases farmhouses used for agricultural purposes — rather than to trading businesses generally. The qualifying conditions require that the property has been occupied for agricultural purposes for at least two years (if owner occupied) or owned for at least seven years (if let to a tenant farmer). The April 2026 changes apply the same £2.5 million combined cap to BPR and APR assets — the cap covers the total of both reliefs, not each separately.

What is the effective IHT rate on business and agricultural assets above the cap?

The relief above the £2.5 million cap is 50% rather than 100%. The standard IHT rate is 40%. Applying 50% relief to an asset reduces its taxable value by half, meaning IHT at 40% applies to the remaining 50% — an effective rate of 20% on the full value of the excess. So a business valued at £4.5 million would attract IHT of 20% of £2 million (the excess above the cap), which is £400,000, in addition to any IHT on assets outside the qualifying categories in the estate.

Does the £2.5 million cap apply separately to BPR and APR, or is it a combined limit?

It is a combined limit. A business owner who also has a farm does not receive £2.5 million of relief for the business and a separate £2.5 million for the farm. The cap applies to the total value of all qualifying BPR and APR assets in the estate. Where an estate has qualifying assets of both types, it is necessary to allocate the combined £2.5 million allowance across them in the most tax efficient way.

Can my spouse and I each claim the £2.5 million cap?

Yes. Each individual has their own £2.5 million cap. A couple who each own qualifying business or agricultural assets can each shelter up to £2.5 million at 100% relief — a combined protection of £5 million. In addition, if one spouse dies without using their full cap, the unused portion can be transferred to the surviving spouse, in the same way as the standard nil rate band. This makes the way business ownership is structured between spouses significantly more important and valuable under the new rules than before.

Do the changes affect lifetime gifts made before 6 April 2026?

Partially. If a qualifying gift was made before 6 April 2026 and the donor survives seven years from the date of the gift, the gift falls outside the estate under the old unlimited rules. If the donor dies within seven years and after 6 April 2026, the failed gift is assessed under the rules in force at the date of death — meaning the new capped rules apply to determine the available relief on that failed gift. Gifts made before April 2026 are not grandfathered under the old rules if the donor dies under the new regime.

Can I pay the IHT on business or agricultural assets in instalments?

Yes. Where IHT arises on qualifying business assets — including shares in unquoted companies, interests in a business, and land — the estate can elect to pay the tax in 10 equal annual instalments rather than as a lump sum. For qualifying business property and agricultural property, these instalments are interest free. The instalment option does not reduce the total tax owed; it spreads the payment over 10 years to reduce the immediate cash flow impact on the estate.

Do AIM shares still qualify for BPR after the April 2026 changes?

Yes, provided the underlying company carries on a qualifying trading business. AIM shares have long been used as a BPR planning vehicle because they qualify after only two years of ownership and are considerably more liquid than interests in private businesses. The April 2026 changes do not remove BPR from AIM shares — they subject the excess above the £2.5 million cap to 50% relief rather than 100%. For investors with AIM portfolios specifically assembled for BPR purposes, any portfolio value above £2.5 million now generates an IHT exposure of 20% on the excess.

What planning steps should I take before 6 April 2026?

The most urgent actions are to obtain a current valuation of your qualifying business or agricultural assets so you know exactly where you stand relative to the £2.5 million cap; to review whether restructuring ownership between spouses before April 2026 could maximise the combined £5 million cap; to consider whether lifetime gifts of qualifying assets before April 2026 are appropriate given your health, family circumstances, and the seven year survival requirement; to review and update your will to reflect the new rules; and to consider life assurance written in trust as a mechanism for funding any IHT liability that cannot be mitigated through reliefs and planning. Time is short — CoreAcc Accountants strongly recommends that business owners and farmers with estates potentially above the £2.5 million cap take professional advice before 6 April 2026.

Does holding business assets in a trust still work for IHT planning?

Trusts holding qualifying BPR or APR assets continue to benefit from the reliefs, but the new cap applies equally to trust held assets. The periodic charge applicable to discretionary trusts every 10 years will be affected where the trust holds qualifying assets above the cap — the excess is now subject to an effective charge rate that was previously mitigated by 100% relief. Life interest trusts are affected on the death of the life tenant in the same way as personally held assets. Trustees should review their trust deeds, investment policies, and succession plans with their advisers as a matter of priority.

What CoreAcc Accountants Can Help You With

At CoreAcc Accountants, we have been working with business owners and farm owners since the October 2024 Budget to assess the impact of these changes and identify the planning options available before 6 April 2026. With 31 days remaining, the window for planning under the current rules is narrow but not yet closed.

We can help you with a full estate valuation review, assessing the current value of your qualifying business or agricultural assets and establishing exactly how much of your estate exceeds the £2.5 million cap and what IHT charge would arise under the new rules. We can model the impact of different ownership structures between spouses and whether restructuring before April 2026 is beneficial. We can review your existing will and flag where it no longer reflects the new rules or fails to make optimal use of the combined cap. We can advise on the role of lifetime gifting in your succession plan, including the seven year survival requirement and the implications for management succession. And we can coordinate with solicitors and financial advisers to ensure that life assurance and trust arrangements are properly aligned with your overall succession plan.

Get in Touch

The April 2026 changes are not a future risk to keep an eye on. For business owners and farmers with qualifying assets above £2.5 million, they are an imminent change that takes effect in 31 days. Wills drafted before October 2024, succession plans designed around unlimited BPR, and AIM portfolios assembled on the assumption of full relief need to be reviewed now.

Contact CoreAcc Accountants today for a confidential conversation about your estate and what can still be done before 6 April 2026.

CoreAcc Accountants is an ACCA accredited firm of Chartered Certified Accountants based in Borehamwood, Hertfordshire. This article was published on 6 March 2026 and reflects legislation confirmed at that date in relation to the changes to Business Property Relief and Agricultural Property Relief taking effect from 6 April 2026. It does not constitute legal or financial advice. Always seek specific professional advice for your individual circumstances.

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