Preparing for Inheritance Tax Changes to Business Property Relief
The 2026 changes to Business Property Relief (BPR) and Agricultural Property Relief (APR) is a seismic shift in the inheritance tax (IHT) landscape.
In this blog, we’ll break down exactly what’s changing, what it means for you (or your clients), and how Hepburn Delaney can help you prepare.
What Are The Current BPR and APR Laws?
BPR and APR have historically offered a powerful way to reduce, or potentially eliminate, inheritance tax on certain types of business and agricultural assets. They were designed to protect family-run businesses and farms, helping them to pass on assets without being hit by hefty tax bills that could force a sale of the business or land.
Currently, BPR and APR can offer up to 100% relief from inheritance tax, with no upper limit on the amount that can be claimed. They also operate independently, so if you own assets qualifying for both, you could potentially benefit from full relief on each.
What’s Changing in April 2026?
From April 2026, the government is introducing a £1 million cap on the amount of combined BPR and APR that can be claimed. Here’s a summary of the key changes:
The New Cap
The full 100% relief will only apply to the first £1 million of qualifying assets across both BPR and APR. Any amount over that will receive only 50% relief.
Non-Transferable Between Spouses
Unlike the current system, the £1 million cap cannot be transferred between spouses. This means each individual’s estate will be subject to the limit separately, regardless of marital status.
Trust Planning Impacted
Gifts into trusts are now also subject to the £1 million limit. And if you set up multiple trusts after 30 October 2024, they will share that same allowance, tightening the rules even further.
These changes could drastically increase the IHT payable on estates that include high-value business or agricultural assets.
How Could This Affect You?
The introduction of this cap could mean significant inheritance tax bills for families who have long assumed that their assets would be fully protected by BPR or APR.
If your business, farm, or qualifying property is valued above £1 million, your estate could suddenly be facing a tax bill you hadn’t accounted for.
Let’s say, for example, your qualifying business assets are worth £3 million. Under the new 2026 rules:
- Up to £1 million would benefit from 100% relief.
- The remaining £2 million would only be eligible for 50% relief.
That means £1 million could now be taxed at 40%, potentially creating a £400,000 tax liability.
Other Compounding Factors
The inheritance tax picture is set to become increasingly convoluted and complex. In addition to the changes to BPR and APR, there are a number of other factors to consider:
- The Nil Rate Band (the amount of an estate that is tax-free) remains frozen at £325,000 until 2030. With rising property and asset values, more estates are being pulled into the IHT net.
- From April 2027, pensions may also become taxable upon death, further increasing the tax burden on future generations.
- The changes to trust rules mean that using multiple trusts to mitigate tax is no longer as effective. Post-October 2024 trusts created by the same person will be treated as a single entity for the £1 million allowance.
The wave of new rules has meant that careful, strategic planning and preparation is more important than ever.
What You Can Do Now
With some time before the new rules take effect, the earlier preparation the better. Getting expert legal and financial advice now could save your family from a much larger tax bill in the future.
Five Things to Start Considering From Today:
1. Review Your Estate
Identify all business and agricultural assets and determine their eligibility under current BPR and APR rules. Valuations will become increasingly important.
2. Work with Experts who Collaborate
Collaborate with tax planning solicitors, like our experienced team at Hepburn Delaney, who will work alongside your financial advisers and accountants to create the best possible outcome for your tax liabilities.
3. Revisit Any Existing Trusts
If you’re considering using trusts or have already done so, it’s crucial to check whether they’ll be caught by the new limits. We can help ensure any structures remain tax-efficient.
4. Explore Inter-spouse Transfers and Lifetime Gifts
While the new £1 million cap is not transferrable between spouses, inter-spouse transfers remain exempt from IHT and Capital Gains Tax. Lifetime gifting strategies may also be worth considering.
5. Lifetime Gifting
Lifetime gifting is a common way to reduce tax liability, although gifting assets or wealth must be transferred within 7 years of your death. If you die within that 7 year transfer window, then some or all of the gift may still be taxable. However, taper relief could reduce the bill (depending on how long ago the gift was made), so this could be key in your wealth management plan.
Review Your Will
With the tax landscape changing, one of the most important things you can do is to ensure your Will reflects the current landscape.
If your Will was written based on the assumption of unlimited relief, it may no longer achieve the intended tax savings under the new £1 million cap. For example, if you’re leaving a qualifying business to a child or placing it into a trust, this could have very different tax implications after the changes come into effect in 2026.
Inheritance Planning with Hepburn Delaney
Our solicitors can review your Will alongside your overall estate and advise whether updates are needed to protect your beneficiaries from unexpected tax bills.
Our team of experienced tax planning solicitors can assist you in navigating the intricacies of the new tax regulations. We will assess your assets and current tax situation to advise you on potential strategies that will mitigate your future tax liability.
These strategies may include lifetime gifting, restructuring your Will, and exploring tax-efficient investment options. Please get in touch with our inheritance team to find out how we can help.
