Business Property Relief (BPR) has long been an essential part of estate planning for business owners, offering up to 100% relief on qualifying business assets when an individual passes away. This tax relief has allowed many families to pass their business interests on to future generations without incurring significant Inheritance Tax (IHT) liabilities, ensuring long-term continuity for family-run businesses.
However, in the Autumn 2024 Budget, the government announced some key changes to BPR that will reshape how business assets are treated for IHT purposes. These changes will have an impact on how business owners plan for the future, particularly those with significant business or agricultural assets.
What is Business Property Relief?
Business Property Relief (BPR) is a tax relief that allows individuals to pass on qualifying business assets free from IHT. These assets can include shares in family businesses, provided they meet certain criteria.
Under the current rules, there is no limit to the relief available for qualifying business assets, meaning many family businesses have been able to transfer to future generations free of IHT.
Key changes to BPR – Autumn 2024 Budget
The Autumn 2024 Budget announced significant changes to BPR, with a new £1 million cap on the amount of qualifying assets that can benefit from 100% relief. Here’s a breakdown of the main changes that will take effect from 6 April 2026:
£1 million cap on 100% BPR relief
From 6 April 2026, the amount of combined business and agricultural property qualifying for 100% relief will be capped at £1 million. Any qualifying assets above this £1 million threshold will be eligible for a reduced 50% relief.
Application of the £1 million allowance
The £1 million cap will apply to all chargeable transfers including:
- assets in the estate at death
- lifetime transfers made to individuals within 7 years of death
- chargeable lifetime transfers, which trigger an immediate IHT charge, such as transfers of assets into trust.
Certain assets that automatically qualify for 50% relief, will not count towards the £1 million allowance.
No transfer of unused allowance between spouses or civil partners
Under the new proposals, any unused portion of the £1 million allowance will not be transferable between spouses or civil partners. This limits the flexibility that many couples have previously enjoyed in terms of IHT planning and may mean that the traditional tax planning used in Wills needs updating to maximise the relief available.
Lifetime transfers and timing
The new rules will apply to lifetime transfers made on or after 30 October 2024, if the donor dies on or after 6 April 2026. This means that the impact of these changes will start to affect transfers made in the lead-up to 2026, so it’s important to start planning now.
AIM shares – reduction of relief from 100% to 50%
Another important change relates to shares listed on the Alternative Investment Market (AIM). From 6 April 2026, BPR relief for AIM shares will be reduced from 100% to 50% which could significantly impact individuals with large investment portfolio.
How will these changes impact your estate?
An individual has an estate worth £3 million, including £2 million in qualifying private company shares. Here’s how the new rules will impact the IHT payable:
| Death Before 6 April 2026 | Death After 6 April 2026 |
| Value of shares: £2,000,000 | Value of shares: £2,000,000 |
| 100% BPR: (£2,000,000) | 100% BPR on first £1m allowance: (£1,000,000) 50% BPR on remaining £1m: (£500,000) |
| Value subject to IHT: £0 | Value subject to IHT: £500,000 |
| IHT payable at 40%: £0 | IHT payable at 40%: £200,000 |
As you can see, under the new rules, the IHT payable on the shares will be £200,000, which would have been fully exempt under the current rules.
Summary of key points
- A £1 million cap on 100% BPR relief for qualifying business and agricultural assets will apply from 6 April 2026.
- Assets exceeding the £1 million threshold will be eligible for 50% BPR relief.
- BPR relief for AIM shares will be reduced from 100% to 50% from 6 April 2026.
- Any unused portions of the £1 million allowance will not be transferable between spouses or civil partners.
The changes announced in the Autumn 2024 Budget will mark a substantial shift in the way business and agricultural assets are treated for IHT purposes. The introduction of a £1 million cap on 100% relief means that estates with significant business or agricultural property, will be impacted by higher IHT liabilities.
The next step
If you are a business owner, now is the time to review your estate planning strategy. With the new rules coming into effect in April 2026, there is still time to take steps to reduce the impact of these changes. We can help you understand how these changes affect your specific situation and explore ways to mitigate any potential IHT liabilities.
If you require any assistance regarding changes to Business Property Relief, please get in touch using the form below.
