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From 6 April 2026, Business Property Relief changes significantly. The first £2.5m of combined BPR and APR qualifying assets still attracts 100% relief, but anything above that threshold is only 50% relieved — meaning 40% IHT applies to half the excess value.
The reform was announced at the Autumn Budget 2024, originally with a £1 million allowance. HMRC's policy paper records that the government announced on 23 December 2025 that the allowance would be increased to £2.5 million, and it takes effect from 6 April 2026. Earlier coverage quoting a £1 million figure is out of date.
See also: APR changes April 2026 and AIM shares IHT relief changes.
Business Property Relief is an inheritance tax relief that reduces — or eliminates — the value of qualifying business assets when calculating IHT. Introduced in 1976 and now governed by the Inheritance Tax Act 1984, BPR was designed to allow family businesses to pass from one generation to the next without a forced sale to pay tax.
Under the rules that applied until 5 April 2026, qualifying business assets attracted either 100% or 50% relief, with no cap on the total value that could qualify for 100% relief. This meant a business worth £10m could pass entirely free of IHT if it met the qualifying conditions.
That changes from 6 April 2026, when a new £2.5m cap takes effect. The change applies to both BPR and Agricultural Property Relief (APR), with the cap applying to the combined total across both reliefs.
From 6 April 2026, the first £2.5m of combined BPR and APR qualifying assets per person still attracts 100% relief — meaning no IHT on those assets. However, any qualifying assets above the £2.5m threshold will only receive 50% relief, meaning the remaining 50% is included in the taxable estate and taxed at 40%.
In practice, assets above the £2.5m BPR/APR threshold that would previously have attracted 100% relief will now face an effective IHT rate of 20% (50% of the 40% rate) on the excess value.
Example: Business owner dying after 5 April 2026
The additional IHT in this example is £300,000 compared with the old rules.
The qualifying conditions for BPR have not changed — what has changed is the amount of relief available above £2.5m. To qualify, business property must generally:
Assets that attract 100% BPR (subject to the new cap) include sole trader businesses, partnership interests, and unquoted company shares. Assets attracting 50% BPR include controlling shareholdings in quoted companies and certain land/buildings used in a business.
AIM shares have historically qualified for 100% BPR, making them a popular IHT planning tool — particularly for investors who held qualifying AIM portfolios for two years or more. From 6 April 2026, HMRC's policy paper says the rate of business property relief is reduced from 100% to 50% "in all circumstances for shares admitted to trading on recognised stock exchanges designated as ‘not listed’", which includes AIM. Because the £2.5 million allowance applies to property qualifying for the 100% rate, these shares neither use it up nor benefit from it — they are relieved at 50% whatever else is in the estate.
This is a fundamental change for the AIM IHT planning market. See our full guide to AIM shares and IHT relief changes for more detail.
If your estate includes both business property and agricultural property (farmland, farm buildings), the £2.5m cap applies to the combined total across both BPR and APR. You cannot claim £2.5m of BPR and a further £2.5m of APR — the allowance is shared.
Any part of the £2.5 million allowance that is not used on the first death can be transferred to a surviving spouse or civil partner, in the same way as the nil-rate band. Read our guide to APR changes from April 2026 for the full picture.
Gifting qualifying business property before death starts the 7-year clock running. If the donor survives 7 years, the gift falls outside the estate entirely, regardless of BPR. GOV.UK's policy paper on the reform does not set out any transitional treatment for lifetime transfers made before 6 April 2026, so no page — including this one — can tell you that a gift completed before that date is protected from the new rules.
Gifts of business property can also be a disposal for capital gains tax on the gain in value, which is a separate charge from the IHT position.
Transferring business assets into trust is more complex after the 2026 changes. Discretionary trusts are subject to a 10-year periodic charge and exit charges, and BPR can apply to assets held in trust — subject to the qualifying conditions. See our guide to IHT on discretionary trusts.
Assets passing to a spouse or civil partner are exempt from IHT regardless of their value, and each person has their own £2.5m BPR/APR allowance. HMRC's policy paper confirms that "any unused amount of the new £2.5 million allowance can be transferred to a surviving spouse or civil partner", so a couple can in principle have £5m of the 100% allowance between them. This works alongside the transferable nil-rate band.
The features of a business that determine how the allowance applies to it are:
BPR has always been subject to anti-avoidance rules, and these remain in place. Key points to be aware of:
For estates likely to exceed £2.5m in qualifying assets, the questions the April 2026 changes raise are:
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