Inheritance tax: Business property and agricultural property relief

What is business property relief (BPR)?

Business property relief is an inheritance tax relief which applies to qualifying business assets. It was originally introduced in 1976 to allow businesses to be passed down either inheritance tax free or at a reduced rate without the family of the deceased having to sell the business. 

What is agriculture property relief (APR)?

Agricultural property relief is an inheritance tax relief, which helps farmers and landowners pass on agricultural property without a large tax bill, either during their lifetime or when they die.

What has changed from 6 April 2026?

• Individuals now have a £2.5 million (100% IHT relief allowance) which applies to the combined value of assets that qualify for 100% APR and/or 100% BPR.
• The £2.5 million allowance will apply during lifetime and on death, meaning that qualifying assets that have been gifted on or after 30 October 2024 where the donor dies on or after 6 April 2026 will reduce the allowance available on death.
• For lifetime gifting the 100% IHT relief allowance will refresh every seven years and will be increased in line with the Consumer Prices Index from April 2031. However, it should be noted that this won’t be automatic, and a future government would need to implement a statutory instrument.
• For relevant property trusts there will also be a £2.5 million allowance (100% trust relief allowance). The 100% trust relief allowance will refresh every 10 years.
• 50% relief will then be available on qualifying assets more than the £2.5 million allowance, meaning an effective IHT charge of 20%. This will apply to both individuals and trusts.
• Shares in companies designated as “not listed” on the markets of recognised stock exchanges (AIM companies and EIS companies quoted on AIM), will only be entitled to relief at 50%.
• Trust exit charges have been standardised meaning all relevant property trust exit charges will be calculated on unrelieved values (before APR/BPR) regardless of whether the exit takes place before or after the first 10th anniversary.
• On death any individual’s unused allowance can be transferred to a spouse or civil partner, even if first death occurred before 6 April 2026. 
• The option to pay IHT by up to 10 equal annual instalments, interest free, will be extended to all property eligible for APR/BPR.

Things to consider

For many clients, an IHT liability may now exist where none was expected. Proactively review existing business-owning and farming clients.

Think about clients who own trading businesses valued above £2.5m. As way of illustration an individual shareholder holds a trading company valued at £5m. On death only £2.5m will benefit from 100% relief with the remaining £2.5m only receiving 50% relief. This would result in an IHT liability of £500,000.

Remember that clients holding AIM or EIS shares will now have an IHT liability.

How will this IHT liability be met without disrupting the business or farming operation? In many cases, a life plan written in trust can provide a straightforward cost-effective solution to meet the liability without forcing the sale of assets or placing pressure on the next generation.

Where clients already hold a life plan check whether the plan allows additional cover under a guaranteed insurability option following a change in IHT legislation.

Check whether structures and planning still align with client’s objectives. Consider whether succession planning should be brought forward. Clients might want to consider introducing family members earlier by gifting qualifying assets during their lifetime  with the hope of surviving seven years. But as with any gifting, consideration needs to be given to other tax implications, for example, capital gains tax.