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.
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