As we enter the new tax year, it’s essential that business owners prepare their estate for changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), which took effect on 6 April 2026.
These changes could have significant implications for those with significant agricultural or business assets, so you should review your current arrangements and ensure your Will is up to date.
What are APR and BPR? And what has changed?
APR and BPR have historically allowed qualifying business and agricultural assets to be passed on to beneficiaries on death with little or no Inheritance Tax (IHT) exposure, thanks to a 100 % tax relief.
However, from 6 April 2026, a cap has been introduced, limiting the value of assets that can benefit from the full IHT relief.
While the original Government proposal was set at £1 million, consultations and lobbying from farmers, landowners and business owners led to a revised threshold of £2.5 million per individual.
This means individuals can now pass on up to £2.5 million of qualifying business or agricultural assets without paying IHT.
Anything above this threshold will see the rate of tax relief reduced to 50 %, meaning there will be a 20 % IHT charge on the value of assets above the limit.
For individuals holding both business and agricultural property, the £2.5 million allowance will be shared between them.
As a result, a mixed portfolio of business and farming assets could reach the £2.5 million cap sooner than anticipated.
Good news for couples
For married couples or civil partners, the good news is that any unused allowance can be transferred between spouses or civil partners.
This provides a combined allowance of up to £5 million, on top of the existing nil-rate band and residence nil-rate band of £1 million, offering more protection for couples with significant agricultural or business assets.
Whilst the increase to the threshold and the ability to pass on unused allowance are welcomed, many business owners and families may still face the prospect of unexpected IHT liabilities, especially if their Will, estate or succession plans haven’t been reviewed recently.
How the BPR cap will impact business owners
The introduction of the BPR cap will impact many business owners, particularly those with high-value or established enterprises.
For example, shareholdings in private companies, partnership interests and certain trust-held assets may no longer benefit from 100 % BPR.
Importantly, shares listed on the Alternative Investment Market (AIM) will see BPR reduced from 100 % to 50 %.
This change increases the exposure of business assets to IHT, particularly for business owners who had previously relied on the full relief to pass on their business to the next generation.
Business owners will also need to consider how any future IHT liability will be funded without placing pressure on the business itself, which could have long-term implications on its success.
The importance of reviewing your plans
These changes do not remove the value of APR and BPR but instead require a more proactive approach to inheritance tax planning.
Business owners must review:
For business owners, particularly those with significant business assets, it may now be necessary to pass on those assets in stages, rather than as a single transfer, which may also affect the timing and structure of wider succession plans.
How we can help
Our private client team specialises in estate and succession planning for business owners and their families.
As such, we can support you:
If you would like advice on how the changes to APR and BPR affect your position, please contact our private client team today.
Disclaimer: Please note that while we provide expert guidance on estate planning and succession matters, Hethertons Solicitors does not provide direct tax advice. However, we work closely with trusted accountancy firms who can assist you with tax-specific advice and ensure your tax planning is aligned with your overall estate and business strategies.
