This time last year, the Chancellor announced major changes to two key Inheritance Tax (IHT) reliefs – Business Property Relief (BPR) and Agricultural Property Relief (APR) which will apply from 6 April 2026.
Draft legislation, published in July 2025, confirmed a significant restriction in how much value can qualify for 100% relief. These proposals represent the most substantial shake-up of IHT reliefs in years, and if you own business or agricultural assets, they may significantly impact your estate planning.
What changes are being made to inheritance tax reliefs?
Currently, APR and BPR give up to 100% relief from IHT on qualifying assets, such as:
- Unquoted trading company shares
- Business premises used in a qualifying trade
- Farmland and agricultural property
From 6 April 2026, a new £1 million lifetime allowance will apply to the combined value of business and agricultural property eligible for 100% relief. The key points are:
- The £1m allowance will apply per individual, in addition to existing nil-rate bands and exemptions.
- Where the total qualifying value exceeds £1m, relief will be capped at 50% on the excess.
For individuals, the £1m allowance will cover:
- Property in an estate at death.
- Lifetime transfers to individuals in the seven years before death.
- Chargeable Lifetime Transfers (CLTs) where there is an immediate lifetime charge (e.g. most transfers into trust).
What else is changing?
Another important proposal affects AIM-listed shares. These currently qualify for 100% BPR as unquoted shares but, from April 2026, they will be treated as “not listed” on recognised exchanges and will only qualify for 50% relief.
Example: The cost of change
Let’s say an individual holds shares in an unquoted trading company worth £2 million:
- Under the current rules: the entire value could qualify for 100% BPR – meaning no IHT payable.
- Under the proposed rules: only £1 million qualifies for 100% relief – meaning the remaining £1 million gets 50% relief. This results in £500,000 forming part of the taxable estate.
What should I do now?
While the changes are still at draft stage, they are a clear signal of government intent, and early preparation is key. Here’s where to start planning:
- Understand your exposure: Start with a detailed assessment of your estate, including business and agricultural assets. This will help estimate the scale of potential IHT liabilities from April 2026.
- Review your Will: Ensure your Will reflects your wishes from an IHT perspective. In some cases, minor updates could make a significant difference to your estate’s tax position.
- Consider succession planning: For those planning to gift or transition business assets, now is a good time to explore tax-efficient structures, particularly where trusts or company restructuring may be relevant.
How can we help?
While the legislation is not yet final, business owners and asset holders should begin preparing for these restrictions now.
We expect to hear more in the Budget later this month. To understand the impact of the Autumn Budget in more depth after the announcements, join us at our Autumn Budget Breakdown event held jointly with legal firm Glaisyers ETL. For more information and to register, visit our Eventbrite page.
Alternatively, you can contact our team for advice on tax@haroldsharp.co.uk, 0161 905 1616, or complete our Contact Form for a callback.