Business Property Relief Is Changing...

Major changes are coming to one of the most valuable inheritance tax (IHT) reliefs for UK business owners. From 6 April 2026, sweeping changes to Business Property Relief (BPR) will significantly scale back the protection currently available on qualifying business assets – potentially exposing estates to significant tax liabilities.

What’s Changing?

Currently, BPR provides 100% IHT relief on the value of qualifying business assets. However, under the new rules, set to take effect from 6 April 2026:

• The first £1 million of qualifying business assets will still receive 100% BPR

• However, any value above £1 million will qualify for only 50% relief (resulting in an effective tax rate of 20% on all value above £1 million)

This severely shifts the landscape for business owners of high-value trading companies.

Who’s Affected?

These changes will impact a wide range of individuals and businesses, including:

• Owners of private trading companies valued at over £1 million

• Investors holding AIM-listed or unlisted shares

• Families using trusts to pass down business assets

• Entrepreneurs planning to scale or exit their businesses in the next 5 to 10 years

If you fall into any of these categories, proactive planning is essential.

Why It Matters

Current position: A business owner with £3 million in qualifying company shares currently enjoys full IHT relief.

From 6 April 2026:

• The first £1 million remains tax-free

• The remaining £2 million gets 50% relief thus leaving £1 million exposed to IHT

• At 40%, that’s £400,000 in tax, potentially payable within six months of death

And for owners of larger businesses the impact is of course even greater.

Anti-Forestalling Rules: The Hidden Trap

It is worth noting that making a gift prior to 6 April 2026 may not be a 100% effective tax planning tool. This is because the government has introduced anti-forestalling measures as follows:

Any gifts made on or after 30 October 2024 will be caught by the new BPR regime if the donor dies on or after 6 April 2026.

This means that even if you transfer assets now, they may still be subject to the reduced relief if death occurs after the new rules come into effect on 6 April 2026, if the donor does not survive 7 years from the date of the gift. Timing and structure are crucial, especially for gifts into trusts or gifts to family members. Insurance options might be part of the answer here.

Liquidity Headaches: Many estates are asset-rich but cash-poor. A sudden six-figure tax bill could force heirs to sell off parts of the business at reduced prices to cover IHT, even if they wish to keep it in the family.

Before-and-After Comparison Table

Scenario	Current Rules	From April 2026
Private company shares worth £3M	100% BPR on full £3M = £0 IHT	100% BPR on £1M + 50% on £2M = £400K IHT exposure
AIM-listed shares worth £1.5M	100% BPR = £0 IHT	50% BPR = £300K IHT exposure
Trusts with multiple business asset gifts	Each trust could claim full BPR separately	£1M cap applies per settlor, not per trust
Spouse inherits unused BPR allowance	N/A (not needed or previously relevant)	No transfer of unused £1M allowance permitted

What actions can be taken now

Business owners shouldn’t wait until 6 April 2026. Steps to consider include:

• Reviewing ownership structures to thoroughly assess exposure

• Exploring lifetime gifting strategies to use today’s full relief while it lasts.

• Modelling IHT liabilities under both current and future rules to test resilience of the family business to future tax shocks

Most importantly, revisit your estate plan. What worked before may be obsolete soon.

The upcoming BPR changes represent a fundamental shift. Business owners who take action now can still protect the value they’ve worked so hard to build.

About the author - Simon Warne is a tax partner at Crowe UK. If you need help unpicking how these changes could impact your plans or affect your circumstances, then please do get in touch with your usual Crowe contact.