Business Property Relief in 2026: What Business Owners Need to Know

For decades, Business Property Relief gave business owners a powerful shield against inheritance tax. Business Property Relief (BPR) meant that qualifying business assets could be handed down free of inheritance tax altogether. From April 2026, that shield gets smaller.

The reforms announced in the Autumn 2024 Budget and updated in December 2025, represent the most significant shift in inheritance tax planning for business owners in a generation. If you own a private company, a stake in a family business, or significant business assets, now is the time to understand what is changing and what your options are.

Here's what the changes mean and why even businesses well below the £2.5 million cap should be paying attention.

What is Business Property Relief and why does it matter?

Business Property Relief is a form of inheritance tax relief that allows qualifying business assets to be passed on either during a business owner's lifetime or on death, with a reduced or eliminated tax charge. Until now, most actively trading businesses qualified for 100% relief meaning the full value of the business could be inherited without triggering an IHT bill, regardless of size.

That made BPR the single most valuable IHT planning tool available to business owners. A family business worth £5 million, £10 million or more could change hands on death without a penny of inheritance tax being due, provided the qualifying conditions were met. 

BPR applies to: sole trader businesses, partnership interests, shares in unquoted companies (including AIM-listed shares), and controlling shareholdings in quoted companies. It does not apply to investment-only businesses such as property portfolios. 

What is changing for business property relief in April 2026?

From 6 April 2026, 100% Business Property Relief will be capped at a combined allowance of £2.5 million per individual (covering both BPR and Agricultural Property Relief together). Here is what that means in practice:

• Business assets up to £2.5 million: still eligible for 100% relief; no inheritance tax due.

• Business assets above £2.5 million: only 50% relief applies, resulting in an effective IHT rate of 20% on the excess. 

• AIM-listed shares and EIS investments: no longer qualify for 100% relief; 50% relief applies instead.

• Married couples and civil partners: the unused allowance from the first death can now be transferred to the survivor, meaning up to £5 million of qualifying assets can benefit from 100% relief on the second death.

The £2.5 million allowance will be indexed to CPI from April 2031, but remains fixed until then.

Important: The new rules apply to lifetime gifts made on or after 30 October 2024 if the donor dies on or after 6 April 2026. If you have already transferred business assets, those transfers will be subject to the new caps if death occurs after the implementation date.

The April 2026 changes are significant but they don't mean inheritance tax planning is out of reach. There are several strategies available to business owners from lifetime gifting and trusts to insurance solutions. Additionally, the earlier you start, the more options you have.

In another article, we will walk through the main planning approaches in detail, including a worked example of how a Whole of Life policy can be used to meet an IHT liability without forcing a sale of the business. Click here to read the article.